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.     

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.     

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.     

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.     

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.     

Oxytocin and the Biological Basis for Interpersonal and Political Trust

Political scientists have documented the many ways in which trust influences attitudes and behaviors that are important for the legitimacy and stability of democratic political systems. They have also explored the social, economic, and political factors that tend to increase levels of trust in others, in political figures, and in government. Neuroeconomic studies have shown that the neuroactive hormone oxytocin, a peptide that plays a key role in social attachment and affiliation in non-human mammals, is associated with trust and reciprocity in humans (e.g., Kosfeld et al., Nature 435:673–676, 2005; Zak et al., Horm Beh 48:522–527, 2005). While oxytocin has been linked to indicators of interpersonal trust, we do not know if it extends to trust in government actors and institutions. In order to explore these relationships, we conducted an experiment in which subjects were randomly assigned to receive a placebo or 40 IU of oxytocin administered intranasally. We show that manipulating oxytocin increases individuals’ interpersonal trust. It also has effects on trust in political figures and in government, though only for certain partisan groups and for those low in levels of interpersonal trust.     

A commentary on “Does the Fed contribute to a political business cycle?”

Abrams and Iossifov (2006) find that during 1957–2004, monetary policy turned significantly more expansionary prior to U.S. presidential elections when the Federal Reserve chairman and the incumbent president belonged to the same political party. However, their long sample period obscures changes in trends during the period stemming from advances in macroeconomic theory and in the implementation of monetary policy. Indeed, when one considers only the Volcker–Greenspan era (1979–2004), there is insufficient evidence to accept the notion of a political business cycle effect.     

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.     

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.     

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 decade of dissent: explaining the dissent voting behavior of Bank of England MPC members

We examine the dissent voting record of the Bank of England Monetary Policy Committee. Contrary to findings in the FOMC literature (for example Havrilesky and Schweitzer in The Political Economy of American Monetary Policy, pp. 197?C210, 1990; Chappell et al. in Q. J. Econ. 108(1):185?C218, 1993), the effects of members?? career backgrounds and the political channel of appointment on voting behavior are negligible, reflecting the distinct institutional constraints and incentives associated with UK monetary policy. Our findings also suggest that literature which characterizes voting behavior as being predominantly determined by members?? internal or external status is overly simplistic. This view is supported by econometric results appertaining to the introduction of member-specific fixed-effects, which account for possible unobserved heterogeneity.     

Democracy and dictatorship revisited

We address the strengths and weaknesses of the main available measures of political regime and extend the dichotomous regime classification first introduced in Alvarez et al. (Stud. Comp. Int. Dev. 31(2):3–36, 1996). This extension focuses on how incumbents are removed from office. We argue that differences across regime measures must be taken seriously and that they should be evaluated in terms of whether they (1) serve to address important research questions, (2) can be interpreted meaningfully, and (3) are reproducible. We argue that existing measures of democracy are not interchangeable and that the choice of measure should be guided by its theoretical and empirical underpinnings. We show that the choice of regime measure matters by replicating studies published in leading journals.     

The political economy of smoking regulation and taxation

Although anti-smoking policies are on the political agenda in almost all developed countries, a general understanding of these policies is still lacking. Applying the majority voting model of Buchanan and Vanberg (Public Choice 57(2):101–113, 1988) to tobacco taxation and smoking regulation shows that different smoking policies are feasible, depending on the composition of the majority of voters with smokers and non-smokers: (1) internalization of spill-over costs with a mixed majority of smokers and non-smokers as well as (2) a combination of regulation and taxation with a non-smoker majority. Moreover, the influence of the tobacco industry is also discussed.     

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.     

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.     

Conceptualizing the Relationship Between Persuasion and Legitimacy: Official Framing in the Case of the Chinese Communist Party

In the debate on authoritarian resilience, the importance of persuasion to regime legitimacy has been widely acknowledged, yet a conceptual framework explaining the role of persuasion is still lacking. Against this backdrop, we argue that the framing perspective (Benford and Snow 1988) provides a useful basis for such a framework. Drawing on Beetham’s (1991) legitimacy model, we contend that the ruling elites in authoritarian regimes propagate official frames in a continuous effort to reproduce the belief of the populace in the elites’ leadership qualities and their determination to serve the common interest. In the empirical part of our paper we look at the case of China, where the Chinese Communist Party (CCP) has in recent years reemphasized persuasion as a means of reproducing legitimacy. We then apply our theory in an analysis of the conceptual shifts in the CCP’s frames and ideology, as propagated under its secretary general, Hu Jintao.     

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.     

Divided we vote

Divided government is known to correlate with limited government, but less is understood about the empirical conditions that lead to divided government. This paper estimates the determinants of continuous and categorical measures of divided government in an empirical macro political economy model using 30 years of data from the American states. Voters support more divided government after increased government spending per dollar of tax revenues, but more unified government after worsening incomes and unemployment rates. Only conditional support is found for the strategic-moderating theory (Alesina and Rosenthal in Econometrica 64(6):1311–1341, 1996) that focuses purely on midterm cycles and split-ticket voting absent economic conditions.     

The political economy of unfunded public pension liabilities

This paper applies a public choice approach to the problem of unfunded pension liabilities and adopts the methodology of Congleton and Shughart (1990) to model underfunding of state-level public pension plans using the median voter theorem, along with the theory of “capture” by special interest groups, and a combined model of the two. With panel data from 2001 to 2009, the paper finds that the combined model provides the strongest explanation for the current levels of unfunded liabilities; hence, both median voter preferences and special interest group influence are affecting political outcomes. The special interest group model slightly outperforms the median voter model in direct comparisons.