Why feed the Leviathan?

This is a study about the possibility of self-governance. We designed two versions of a step-level public good game, with or without a centralized sanctioning mechanism (CSM). In a baseline treatment participants play 14 rounds of the non-CSM game. In an automatic removal (AR) treatment participants play 7 rounds with CSM plus 7 rounds without CSM. In voted removal (VR) participants play 7 rounds with CSM followed by a voting stage to decide whether to keep CSM. All VR groups removed CSM. Contributions in AR and VR after CSM removal are dramatically higher than in the baseline. Most groups with a CSM history managed to cooperate until the last round. We do not find more cooperation in VR than in AR.     

Leviathan in a dual economy

This paper studies the policies of a leviathan state with an ambition to make money and to stay in power. The economic framework is a developing country characterized by dual markets. Government revenue is raised by taxing the agricultural sector. Part of this revenue is offered to the politically influential urban population in the form of low productive but well paid public sector employment. I calculate the optimal level of rural taxation from the point of view of the Leviathan and investigate its effects on migration, industrialization, public sector employment and urban unemployment in different political scenarios.     

Cooperation without the Leviathan: Intergovernmental policymaking in Canadian education

A staple of policymaking in any federation is intergovernmental cooperation, which can take the form of vertical initiatives between the central and substate governments or as horizontal initiatives among the substate governments themselves. Most research has focused the former whereby the central government often deploys powerful levers to encourage the constituent members to cooperate. Such accounts, however, cannot be applied to cases occurring without the influence of the proverbial Leviathan. This article sets out to identify conditions that may be conducive to horizontal cooperation, developing a set of propositions focusing on economic, institutional, and ideational factors. These propositions are then considered on three cases of cooperation with varying results in Canadian education. While no single factor can be identified as necessary and sufficient for horizontal cooperation, institutional and ideational conditions interacted in dynamic ways and appeared to play the leading roles in the outcomes presented here.     

Can Leviathan governments mitigate the tragedy of the commons?

This paper explores the conjecture whether the Leviathan motive of politicians — to tax for the purpose of raising revenues rather than for benevolent, Pigovian motives — helps to overcome the inefficiency of international pollution spillovers such as in the cases of acid rain and global warming. It turns out that this conjecture is true in a static context that captures flow externalities, e.g., acid rain, as long as environmental damages are not too high. In contrast, Leviathan motives aggravate the already existing inefficiency in the case of stock externalities (e.g., global warming) despite probably high taxes at the beginning.     

Leviathan and Fiscal Illusion in Local Government Overlapping Jurisdictions

This paper integrates twomodels of local government behavior,leviathan and fiscal illusion, into theframework of overlapping jurisdictions.Estimation of the leviathan and fiscalillusion variables without accounting forvertical effects between overlappingjurisdictions results in overestimation ofthe horizontal effects. Using a medianvoter model and municipal and county datawe find support for the leviathan modelusing traditional tests. These effects arelargely offset, however, when the test isset within the context of the verticalrelationship. We find that municipal percapita expenditures and county per capitaexpenditures are symmetricallycomplementary.     

Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China

Book reviewed: Dali Yang. Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China.
Reviewed by VICTOR SHIH     

New Hampshire's tax-base limits: An example of the Leviathan model

This study views the lack of an income tax on wages and salaries and a general sales tax in New Hampshire as tax-base limits. I use the Leviathan model to analyze the differences between the fiscal system in New Hampshire and the fiscal systems in Vermont, Maine, and Massachusetts. Vermont, Maine, and Massachusetts do not have the tax-base limits that New Hampshire has. From 1957 to 1989, New Hampshire had lower state and local government tax and expenditure levels than the other three states, more rapid population growth, lower welfare expenditures but comparable levels of expenditures for several of the major public services, and a more competitive structure of state and local government.     

From Leviathan to Gulliver? The Decline of the Developmental State in Brazil

This article advances an institutionalist explanation for the decline of Brazil's developmental state, showing how an initially strong state undermined its own strength over time. The Brazilian state greatly expanded its interventionism and fragmented society—through state-corporatist mechanisms—in order to enhance its power to guide development. Yet the mushrooming state apparatus increasingly lacked internal coordination. This disunity diminished the state's capacity to attain its goals and provided added opportunities for the fragmented social groups created by the state's divide-and-rule strategies to "capture" public agencies. The resulting weakening of the state is evident in taxation, the policy focus of this article. Competing state agencies granted proliferating tax privileges, and business sectors supported by clientelist politicians blocked governmental efforts to maintain or raise the tax burden. This decline in extractive capacity contributed to the fiscal crisis that has paralyzed Brazil's developmental state since the early 1980s.     

Laffer paradox, Leviathan, and political contest

This paper considers a political contest model wherein self-interested politicians seek rents from the public budget, while general voters make political efforts to protest against politicians’ rent seeking directly (for example, through voting in referendums such as the passage of Proposition?13) or indirectly (for example, through donating money to organized groups such as the National Taxpayer Union). We show that the political contest may ironically lead to the Laffer paradox; that is, rent-seeking politicians may intend to set the tax rate higher than the revenue-maximizing rate. For taming Leviathans, political protests may not be as effective as competition among governments.     

On distinguishing between Leviathan and Public Interest governments in a federal state

The purpose of this paper is to derive testable implications for the proposition that provincial governments in a specific federal system are Leviathans, that is, revenue maximizers. The Leviathan model, associated with Brennan and Buchanan (1980) hypothesizes that governments behave like monopolies who seek to maximize their revenue. This model is contrasted with an alternative hypothesis, the Public Interest Theory. A theoretical model of a federal state, based on the Canadian system, is constructed and testable implications are derived. The principal feature of the model is that it is set in the context of a particular game involving the federal government, provincial governments and a consumer. In attempting to model this situation, care has been taken to try to incorporate as many institutional features of the Canadian federal system as possible, while still allowing the model to be somewhat parsimonious. With some modification, the model may be applicable to other countries with similar federal systems.     

Crime,Confiscation, and Frowth: For and Against Leviathan

This paper presents a dynamic general equilibrium model ofrent seeking in which the payoffs and the choices between productiveand non-productive activity are endogenous. The economy has the potential for endogenous growth, but when agents can choose between confiscation and productive investment, growth is no longer possible. The confiscation activity has multiple interpretations.In one, confiscation occurs as a result of theft;the lack of sufficient property rights eventually makesinvestment in productive activity unpalatable.Alternatively, confiscation is the result ofgovernment activity (e.g., taxation). The paper underlines the difficulty of creating aninstitutional structure conducive to growth.     

Decentralization as a constraint to Leviathan: a panel cointegration analysis

This paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions. It distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures (common pool versus own resources); it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics; and it extends and revises the datasets generally used in these empirical analyses. The results show that the amount of revenue raised by sub-national governments leads to a long-term fall in the size of government but grants have the opposite effect. In addition, a greater decentralization of expenditure leads to greater overall spending. When the short-term is considered these influences work slowly, as the speed of adjustment towards the desired government size is relatively sluggish. In addition, in the short run, there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government. These results appear robust to changes in the composition of the variables, countries and periods included the sample.     

Can Decentralization Limit Government Growth? A Test of the Leviathan Hypothesis for the Indian Federation

Decentralization in India has only recently gained momentum,particularly with the 73^rd and 74^th amendments in 1992, whichextended constitutional recognition to local governments. Againstthis backdrop, this article examines the Leviathan hypothesisput forth by Brennan and Buchanan for the Indian economy. Thehypothesis asserts that total government intrusion into theeconomy should be smaller when taxes and expenditure are decentralized.A caveat to the Leviathan hypothesis is the Collusion hypothesis,which suggests that the disciplining impact of decentralizationcan be nullified if revenue decentralization does not keep pacewith expenditure decentralization and if there is an increasein dependence on intergovernmental grants. Empirical testingfor the Indian federation vindicates both hypotheses, thus suggestingthat a two-pronged strategy is required if government growthis to be checked. More effort must be made to strengthen localbodies. This must be accompanied by a close look at intergovernmentaltransfers and by an attempt to restrict their growth.     

Cost disease versus Leviathan explanations of rising government cost: An empirical investigation

In this paper we reexamine the apparently conflicting empirics of Borcherding et al. (1977) versus those of Barry and Lowery (1984). The latter, designed to test the cost disease versus bureau voting power hypotheses on US Citibase annual data between 1947 to 1979, was retested for the longer period available through 1989. Second, and more importantly, we isolate and test for the presence of a second channel for the exercise of bureaucratic power. That channel is the bureau's ability to use its information advantage to capture a portion of newly generated government rents through higher personal benefits (such as higher salaries). Such an analysis (following West, 1991) requires first that those factors generating new rents for government actually result in successful bureaucratic rent-seeking in the form of higher compensation levels. In addition, the analysis requires that these “artificial” increases in bureaucratic wages show up as significant determinants of the higher cost of providing government services. Incorporating a constructed Kau/Rubin variable into the Barry and Lowery database is then shown to improve the predictive power of both the cost disease and bureaucratic power hypotheses for US annual data between 1948 and 1989.     

(Non)equivalence in a federalism: Dual tax shares, flypaper effects and Leviathan

Among the best-known theorems of fiscal federalism is the presumed allocative and distributive equivalence between a lump-sum grant to a collectivity and a set of lump sum grants to the members of a collectivity. Interestingly, the simple elegance of the theorem is at odds with observed behavior. Grants to governments produce greater public spending than does tax reduction. Explanations of this "flypaper effect" range from misspecified econometric modeling to presumed behavior based on fiscal illusion. In this paper we show that theoretical equivalence exists in a model that recognizes only one tax share, the citizen voter's local tax share. When the model is expanded to include voters' federal tax shares as well as local taxes, non-equivalence and the flypaper effect become the rule, not the exception.