Random timing of elections and the political business cycle

In his 1975 paper, Nordhaus formally proves that governments whose aim is to be reelected, will generate ‘political’ business cycles. Empirical results do not confirm this proposition, especially in countries used to early elections. We show that if there is a non-zero probability for elections to be called before the legal term, the political business cycle will be less pronounced, even if no early election actually takes place; moreover, if the normal electoral cycle is interrupted before the legal term, one might observe an inversion of the business cycle, or no cycle at all.     

Rationality and the political business cycle: The case of local government

The empirical results which have been reported support the hypotheses' implied by the model of rational political behavior set out in Section 2. In pre-election periods, local government development expenditures deviate significantly from their normal levels. The extent of deviation is approximately 20%.Consistent with the predictions of this model, it is found that incumbents not seeking re-election deviated far more in their pre-election discretionary budget expenditure than incumbents seeking re-election. The expenditure gap between the two types of incumbents is large and statistically significant. Incumbents not seeking re-election exhibit a deviation equivalent to 47% of the development budget, while those seeking re-election exhibit a 12% deviation.     

The political monetary business cycle: Political reality and economic theory

This paper addresses the issue of expectations incorporated into political business cycle models. Rational agents anticipate Democratic efforts to stimulate the economy via monetary policy, discounting money supply from the calculations for determining output variance, so that output under Democrats is wholly unaffected by changes in the money supply. Rational agents appear to be naive about Republicans, incorporating money supply into the calculations for determining output variance, so that output under Republicans is significantly related to money supply.     

Do fiscal rules dampen the political business cycle?

This paper develops and tests the theory that fiscal rules limit politicians' ability to manipulate the budget for electoral gain. Using panel data from the American states, I find evidence suggesting that stringent balanced budget rules dampen the political business cycle. That is, while spending rises before and falls after elections in states that can carry deficits into the next fiscal year, this pattern does not exist in states with strict “no-carry” rules. Neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle.     

Testing the satisficing version of the political business cycle 1905–1984

This paper develops a test of the satisficing version of the political business cycle. Previous tests have focused on maximizing models of political behavior and are not sufficiently general to test for satisficing behavior. Using annual U.S. data for the period 1905 to 1984, we find evidence supporting the satisficing version of the political business cycle model, but we reject the maximizing version. In accordance with the satisficing hypothesis, we find that increasing inflation or unemployment and decreasing monetary base growth in the third year of a presidential term are followed typically by reversals during the election year.We wish to thank Gordon Tullock and two anonymous referees for valuable comments.     

The information content of elections and varieties of the partisan political business cycle

This event study uses economic forecasts and opinion polls to measure the response of expectations to election surprise. Use of forecast data complements older work on partisan cycles by allowing a tighter link between election and response thereby mitigating concerns of endogeneity and omitted variables. I find that forecasters respond swiftly and significantly to election surprise. I further argue that the response ought to vary across countries with different institutional foundations. In support, I find that there exist three distinct patterns in forecasters’ responses to partisan surprise corresponding to Hall and Soskice’s three varieties of capitalism.     

Learning,political regimes and the liberalisation of trade

In this article, the probability of opening to trade is related to a country's propensity to learn from other countries in its region. It is argued that countries have different motivations to learn, depending upon the responsiveness and accountability of their political regimes. Whereas democracies cannot afford to be dogmatic, authoritarian regimes are less motivated to learn from the experience of others, even if they embrace policies that fail. Using data on trade liberalisation for 57 developing countries in the period 1970–1999, it is found that democracies confronting economic crises are more likely to liberalise trade as a result of learning; among democracies, presidential systems seem to learn more, whereas personalist dictatorial regimes are the most resistant to learning from the experience of others.     

Trade unions for EMU: Sectoral preferences and political opportunities

Surveys conducted on the political economy of Europe's Economic and Monetary Union have seldom considered the response of domestic interest groups, notably trade unions. This article contrasts and explains the positions on EMU adopted by major British, French and German trade unions, in the process reassessing the so‐called interest group approach to preference formulation. It is argued that while the impact of sectoral orientation appears significant, it is mitigated by the intervention of ideological and institutional factors. On a substantive level, unions turned out to be broadly supportive of what many had labelled a ‘monetarist’ project. If as is often argued, social and political cohesion is needed for monetary union to endure, this represents an important development.     

Challenges to the trade unions: The British and west German cases

The article compares the current crises of the British and West German trade union movements. It argues that re‐organisation strategies to adapt to political and workplace‐related changes are insufficient to reverse the decline in the unions’ influence on government policies and hostile employer strategies. The unions’ position is shaped by both international economic and domestic factors, primarily the relationship to the conservative parties and the bargaining position at the firm level. Strategies to revitalise union power have to be political, not economic or organisational.     

Distribution of income in advanced capitalist states: political parties, labour unions, and the international economy

Abstract. Hypotheses about determinants of income inequality in advanced capitalist societies are tested with data from the World Bank for 1975–80 across virtually the complete population. The results support most of the propositions of a model that takes into account differences in partisan control of government, the organization strength of labour, and the openness of the economy to international market forces. Hypotheses derived from global models of income distribution are not supported. The major findings are (1) that labour organization has no direct effect on income inequality; (2) that strong socialist parties have a negative effect on the size of the gap between the rich and the poor but no effect on the gap between the rich and the middle class; (3) that the governmental strength of conservative parties is unrelated to the size of the gap between the rich and the poor but has a very strong positive effect on the gap between the rich and the middle class; and (4) that, regardless of partisan control of government, relatively small trade dependent economies are more egalitarian than relatively large economies which are less dependent on international trade.     

Neocorporatism and the 'happiness index', or what the trade unions get for their cooperation

Abstract. In concluding a recent analysis of the conditions for trade union wage restraint, Colin Crouch asks 'what neocorporatist unions gain for their members in exchange for restraint?'. An attempt to answer this question is made, first by examining a range of policy outcomes which may be regarded as measures of possible union gains, and, second, by analyzing the problem in terms of indexes measuring possible trade-offs between union objectives. It is suggested that an analysis in these latter terms offers a far more cogent explanation of trade union wage restraint than can be provided by looking at policy outcome measures separately.     

When trade unions succeed: Cases of blocked liberalisation in the common market

Despite the generally accepted weakness of trade unions at the European Union level, an analysis of two high profile cases – the Services Directive and the Port Directive – shows that trade unions are able to mobilise effectively at the European level and, within constellations of actors, crucially impact EU decision making. In contrast to common claims that a lack of access to EU institutions makes such groups powerless, it is argued here that the exclusion of large opposing societal groups from consultations is neither a quick nor a sure fire recipe for dismantling opposition. On the contrary, it politicises the process and may lead to opposing groups mobilising in more contentious ways.     

Social Democrats and trade unions in Scandinavia: The decline and persistence of institutional relationships

Abstract.  This article examines the institutional arrangements between Social Democratic parties and trade unions in Denmark, Norway and Sweden. First, the authors show how these relations have weakened at a varying pace. Party–union ties are now quite distant in Denmark, but remain relatively close in Norway and, especially, Sweden. Second, the authors explore this variation using a simple model of political exchange. The finding is that the intensity of the relationship is correlated with the resources that each side can derive from the other, which in turn reflects national differences. Yet it is also clear that the degree of change is related to the formative phase of the institutional arrangement itself: the weaker the ties were from the beginning, the more easily they unravel in response to environmental changes.     

Sudpolitik: the political economy of Taiwan's trade with Southeast Asia

Abstract

In December 1993 the Taiwan government adopted a policy called nanjin zhengce or sudpolitik, a policy aimed at diverting part of Taiwan's trade and investment flows from China to Southeast Asia. This paper addresses the following questions: what is sudpolitik? why adopt such a policy? what are the economic, political, and strategic considerations in the pursuit of this policy? which countries are its specific targets? how do the countries directly affected by this policy respond to it? The paper also discusses the issue of Taiwan's aid in connection with sudpolitik. While the effectiveness of the policy is far from clear at present, the paper concludes with four observations: Taiwan's trade and aid are beginning to intertwine; Taiwan's diplomacy is largely economically or commercially led; Taiwan has achieved some positive results in improving its relations with Southeast Asian countries; and, Taiwan has reached a new stage in its economic development whereby it needs to invest overseas in order to sustain its economic growth. Overall, sudpolitik represents a novel step in Taiwan's diplomatic practice.