Dupuit, Pigou and cost of inefficiency in public services provision

In this paper we revisit the literature on the economic implications of inefficiency in public services provision. Most authors emphasize the need of changing public sector management practices and the scope of activities carried out by general government. Following Dupuit (1844) and Pigou (1947) we focus instead on the increase in the cost of public services’ provision, when indirect costs, associated with the excess burden of taxation, are taken into account. We rely on Hicks’ compensating variation (following Diamond and McFadden (1974) and Auerbach (1985)), and some public sector inefficiency coefficients from Afonso et al. (2005; 2006) to show that these magnification mechanisms are not only conceptually relevant, they are also important from a quantitative point of view.     

Social or political cleavages? A spatial analysis of?the?party system in post-authoritarian Chile

Lipset and Rokkan??s (Party system and voter alignments: cross national perspectives, Lipset and Rokkan eds., New York: Free Press, pp. 1?C64, 1967) sociological model of cleavages and the so-called ??freezing hypothesis?? dominate theorizing about party system formation. Torcal and Mainwaring (Br. J. Polit. Sci. 33:55?C84, 2003) show the relevance of a purely political cleavage for structuring the party system in the case of Chile, challenging the freezing hypothesis??s claims. They also dispute case-specific research that argues Chile??s party system still reflects a ??three-thirds?? division between Left, Right, and Center. Revisiting this debate, our study employs spatial maps of the party system. Such political-economy models are rare in studies of Latin American politics. The application here supports a democratic/authoritarian political cleavage in Chile.     

Agenda trees and sincere voting: a response to Schwartz

Schwartz (Public Choice 136:353–377, 2008) has identified a controversy within the voting theory literature pertaining to the representation of agenda structures and the consequent definition of sincere voting. This note responds to Schwartz’s remarks by arguing that the kind of agenda tree he uses does not adequately represent some common parliamentary agendas, and that consequently his definition of sincere voting cannot always be applied.     

Islam and democracy

Using the POLITY IV and Freedom House indices, Rowley and Smith (Public Choice 139(3–4):273, 2009) found that countries with Muslim majorities enjoy less freedom and are less democratic than countries in which Muslims are a minority. Because the POLITY IV and Freedom House indices have been criticized on several grounds, I?reinvestigate Rowley and Smith’s finding using the new Democracy-Dictatorship data from Cheibub et?al. (Public Choice 143(1–2):67, 2010). The empirical results confirm that countries with Muslim majorities are indeed less likely to be democratic.     

On choosing the alternative with the best median evaluation

The voting rule proposed by Basset and Persky (Public Choice 99:299?C310, 1999) picks the alternative with the best median evaluation. This paper shows that this MaxMed principle is equivalent to the MaxMin (so-called Rawls??) principle, with the proviso that one can discard half of the population. In one-dimensional, single-peaked domains, the paper compares the MaxMed rule with majority rule and the utilitarian criterion. The MaxMed outcome is rejected by a majority of voters in favor of outcomes that are also utilitarian improvements.     

State aid programs for equalizing spending across local school districts: does the structure of the program matter, or only it’s size?

This paper provides interesting insights into an important causal mechanism underlying Murray, Evans and Schwab’s (Am. Econ. Rev. 88(4):789–812, 1998) finding that court mandated reforms result in less inequality in spending per pupil levels across rich and poor school districts within a state. Treating the choice of an education program’s structure as endogenous, following the analysis of Leyden (Public Finance/Finances Publiques 47:229–247, 1992; Public Choice 115(1–2):83–107, 2003), yields empirical results suggesting that court mandated reforms increase the likelihood that a program’s structure will include a price effect and that the inclusion of a price effect in turn results in a decrease in spending inequality.     

Coase and Bertrand on lighthouses

Coase (Journal of Low and Economics 17(2):185–213, 1974) failed to appreciate that the construction and maintenance of nineteenth-century lighthouses were in part financed by British taxpayers. Bertrand (Cambridge Journal of Economics 30:389–402, 2006) rightly calls him to account. While agreeing with Bertrand’s conclusion, we dispute her reasoning and argue that lighthouses nevertheless could have been supplied by the private sector.     

Endogenous choice of amendment agendas: types of voters and experimental evidence

A stylized model of three parties choosing an amendment agenda and voting over three policy alternatives is analyzed. The analysis yields a classification of five types of voters: random, sincere, strategic, risk-averse, and EUS (expected utility sophisticated) proposed by Enelow (J. Polit. 43:1062–1089, 1981). Laboratory experiments suggest that the choice of agendas can be partially explained by the sincere voting model (26% of voters) and strategic voting model (47% of voters), even when players’ preferences are common knowledge. Risk-aversion may explain choices of up to 56% of the voters. Finally, the EUS voting model explains up to 73% of the observed voting behavior.     

Law-and-economics: why Gordon Tullock prefers Napoleon Bonaparte over the Duke of Wellington; and why he may end up on St. Helena

Most scholars in the field of law-and-economics lean to the view that the common law is efficient. Tullock, however, argues that the common law is inefficient and suggests dramatic modifications to the American legal system, transforming it from a common law system to a civil code system and abandoning the adversarial proceedings in favor of an inquisitorial process. This essay summarizes and critically evaluates the thrusts of Tullock’s 1988 article and his 1997 book, which, together direct a full-frontal attack on the Anglo-Saxon common law system.     

The Effect of “China Bashing” on Sino-American Relations

Many scholars argue that a sizable share of the news about China published in U.S. newspapers engages in ??China Bashing.?? This paper quantifies the extent of the bashing and examines its effect on Sino-American relations. To measure bashing, I develop an index based on the count of articles in major U.S. newspapers that are related to China and also touch on one or more of the following issues: human rights, Tibet, democracy, child labor, and repression. I repeat this process for newspapers from Australia and New Zealand to net out ??fundamental?? news. To examine the effect of the bashing on Sino-American relations, I use the China-US relations score of Yan et al. (Zhongwai guanxi dingliang yuce, [?????????????; Quantitative Forecasts of China??s Foreign Relations]. Beijing, China: Shijie heshi chubanshe, 2009, Zhongwai guanxi jianlan 1950-2005??Zhongguo yu daguo guanxi dingliang hengliang [??????????1950-2005???й???????????????; China??s Foreign Relations with Major Powers by the Numbers 1950-2005]. Beijing: Gaodeng jiaoyu chubanshe, 2010) and estimate a dynamic transfer model with the constructed bashing index, as well as other control variables. The results indicate that a one-standard-deviation shock in bashing leads to a 0.038 point decline in Yan??s Sino-American index after about four months. The results further imply that the cumulative long-run effect of persistent China bashing is equivalent to about 50?% of the decline in Sino-American relations that followed the U.S. bombing of the Chinese Embassy in Belgrade on May 7, 1999, the worst shock to Sino-American relations during the sample period, 1990 to 2010.     

Antitrust public choice(s)

Antitrust legislation and enforcement has over the last few decades been increasingly informed by ever more sophisticated analysis while—at the same time—evidence has continued to mount that the results of antitrust remedies fall far short of the promises held out under still prevalent ‘nirvana fallacy’ (Demsetz in Journal of Law and Economics 12(1):1–22, 1969) expectations. I draw upon a recent Supreme Court decision as well as the results of Young and Shughart’s (Public Choice, 2010. doi:10.1007/s11127_009-9531-y) novel approach to the analysis of antitrust enforcement activities to discuss the extent to which public choice theory is vital in solving the puzzle regarding the “unintended” effects of antitrust (public) choices.     

Tolerance and growth: modeling the empirical relationship

We showed, in Berggren and Elinder (2012), that tolerance toward homosexuals is negatively and quite robustly related to economic growth. In a comment, Bornhoff and Lee (this issue) question this finding on model-specification grounds. By undertaking three changes, they purport to show that our main result does not hold. In this article, we demonstrate that one of these changes is inconsequential (replacing GDP per capita by its logarithm in controlling for conditional convergence) and argue that two of them are questionable. First, the removal of certain central control variable risks introducing omitted variable bias and inconsistent estimates. Second, regional dummy variables are added on arbitrary grounds. For example, by using regional dummy variables that are just as reasonable as the Baltic dummy used by Bornhoff and Lee, we find that significance for tolerance toward homosexuals reappears in our empirical model. In all, this implies that there are good grounds for considering the negative relationship between tolerance towards homosexuals and growth valid, Bornhoff and Lee??s claims notwithstanding.     

Correcting mistakes: cognitive dissonance and political attitudes in Sweden and the United States

Cognitive dissonance theory predicts that the act of voting makes people more positive toward the party or candidate they have voted for. Following Mullainathan and Washington (Am. Econ. J. Appl. Econ. 1:86–111, 2009), I test this prediction by using exogenous variation in turnout provided by the voting age restriction. I improve on previous studies by investigating political attitudes, measured just before elections, when they are highly predictive of voting. In contrast to earlier studies I find no effect of voting on political attitudes. This result holds for both Sweden and the United States.     

The relationship between corruption and income inequality in U.S. states: evidence from a panel cointegration and error correction model

We investigate the causality between corruption and income inequality within a multivariate framework using a panel data set of all 50 U.S. states over the period 1980 to 2004. The heterogeneous panel cointegration test by Pedroni (Oxf. Bull. Econ. Stat. 61:653–670, 1999; Econom. Theory 20:597–627, 2004) indicates that in the long run corruption and the unemployment rate have a positive and statistically significant impact on income inequality while a negative impact is found for real personal income per capita, education, and unionization rate. The Granger-causality results associated with a panel vector error correction model indicate both short-run and long-run bidirectional causality between corruption and income inequality.     

Step return versus net reward in the voluntary provision of a threshold public good: An adversarial collaboration

This research concerns how costs and benefits affect the voluntary provision of threshold public goods. Cadsby and Maynes (J. Public Econ. 71:53–73, 1999) hypothesized that the difference between the value and cost of such a good, its net reward, influences the likelihood of provision. Croson and Marks (Exp. Econ. 2:239–259, 2000) focused on the ratio of group payoff to total cost, the step return. We find that step return is the best predictor overall, although net reward has some impact, negatively affecting the probability of provision with inexperienced participants and positively affecting it with experienced participants.     

A basic tool set for a generalized directional model

In political science, there are two classes of spatial models: those which are based on a distance logic and those which are based on a directional logic. This distinction can be found in terms of diverse topics, as voting theory, coalition theory or legislative politics. While Tsebelis (Br. J. Political Sci. 25:289–325, 1995) among others discussed implications of distance models, the respective counterparts for directional models have not been explicitly derived in the existing literature. We try to close this gap by discussing discrepancies between both kinds of models and derive some of the most relevant tools for analyses based on directional models.     

Special-interest groups and growth

This paper explores empirically the relation between special-interest groups and economic growth. Our analysis exploits new data on the number of groups observed across countries and time, in order to mitigate the identification problems associated with earlier studies. Also in contrast to earlier work, we examine the impact of groups on two sources of growth??capital accumulation and technological change??in addition to the impact of groups on output growth. The findings are consistent with Olson??s (The rise and decline of nations: the political economy of economic growth, stagflation, and social rigidities. New Haven, Yale, 1982) claim that societies with greater numbers of interest groups grow slower, accumulate less capital, and experience reduced productivity growth relative to others.     

Taking alleged dictatorship more seriously: Rejoinder to Fried

Fried (in Public Choise, this issue, 2013) claims that Quesada (in Public Choise 130:395–400, 2007) is wrong in showing that the dictator in a dictatorial social welfare function does not necessarily enjoy absolute decision power. This reply revisits, and illustrates by means of an example, the framework where Quesada’s result is obtained. It is argued that Fried’s counterfactual analysis conducted to invalidate Quesada’s conclusion relies on untenable presumptions: (i) that the rules to identify the values of a social welfare function say something about how these values must have been obtained; and (ii) that counterfactual analysis can be conducted in an environment where causes and effects cannot be unequivocally established.     

The VP-function revisited: a survey of the literature on vote and popularity functions after over 40 years

Nannestad and Paldam (Public Choice 79:213–245, 1994) published herein an extremely influential review of the literature linking economics and elections, what they called the “VP functions.” In that work, they offered a number of conclusions, in proposition form, about the state of the evidence in this field. We present the key ones (16 in all), and assess the extent to which they continue to hold, in light of the new evidence about what has come to be known as economic voting. As shall be shown, Nannestad and Paldam were prescient in their early establishment of many of the principal results explaining how the economy moves the vote choice.     

Does social capital increase political accountability? An?empirical test for Flemish municipalities

Social capital has been shown to positively influence government performance. Boix and Posner (Br. J. Polit. Sci. 28:686–693, 1998) suggest a possible explanation: social capital makes citizens monitor the government more closely. Such monitoring will be more explicit to the extent that instrumental voting motivations outweigh expressive considerations. We identify social capital as a source that facilitates instrumental voting and thus political accountability. We present an empirical test of the Boix and Posner hypothesis and find a positive link between perceived quality of government and election results of the incumbent parties. Crucially, we find this link to be stronger in municipalities high in social capital.