nep-pol New Economics Papers
on Positive Political Economics
Issue of 2005‒07‒11
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Costly Revenue-Raising and the Case for Favoring Import-Competing Industries By Xenia Matschke
  2. Democracy and Economic Development: a Fuzzy Classification Approach By Ana Margarida Oliveira Brochado; Francisco Vitorino Martins
  3. Are Foreign Firms Privileged By Their Host Governments? Evidence From The 2000 World Business Environment Survey By Huang, Yasheng
  4. Does Rapid Liberalization Increase Corruption? By Samia Tavares
  5. Fiscal Equlisation and Citizen's Preferences : Evidence from Swiss Municipalities By Nils Soguel; Alexandre Tangerini
  7. Draft constitution and the decision-making rule for the Council of Ministers of the EU – Looking for alternative solution By Plechanovová, Bela
  8. Beyond the Community Method: Why the Open Method of Coordination Was Introduced to EU Policy-making By Schäfer, Armin
  9. The EC in the WTO: The three-level game of decision-making. What multilateralism can learn from regionalism By Leal-Arcas, Rafael
  10. Sovereignty in Conflict By Besson, Samantha
  11. Europeanisation: Solution or problem? By Radaelli, Claudio M.
  12. Explaining British Policy on the Euro By Howarth, David
  13. Treaty-Making in the European Union: Bargaining, Issue Linkages, and Efficiency By Dür, Andreas; Mateo, Gemma
  14. Labour Reforms: A Delicate Act of Balancing the Interests By Kaur Rupinder; Maheshwari Sunil Kumar
  15. An Iowa Perspective for Enhancing Rural Development and Vitality in the 2007 Farm Bill By Edelman, Mark

  1. By: Xenia Matschke (University of Connecticut)
    Abstract: A standard finding in the political economy of trade policy literature is that we should expect export-oriented industries to attract more assistance than import-competing industries. In reality, however, trade policy is heavily biased toward supporting import industries. This paper shows within a standard protection for sale framework, how the costliness of raising revenue via taxation may make export subsidies less desirable and import tariffs more desirable. The model is then estimated and its predictions are tested using U.S. tariff data. An empirical estimate of the costliness of revenue-raising is also obtained.
    Keywords: Protection for sale, tariffs, trade protection
    JEL: F13 F16
    Date: 2005–06
  2. By: Ana Margarida Oliveira Brochado (Faculdade de Economia, Universidade do Porto); Francisco Vitorino Martins (Faculdade de Economia, Universidade do Porto)
    Abstract: The aim of this work is to (1) analyse whether countries differ on political indicators (democracy, rule of law, government effectiveness and corruption) and (2) study whether countries with different political profiles are associated with different levels of economic, human development and gender-related development indicators. Using a fuzzy classification approach (fuzzy k-means algorithm), we propose a typology of 124 countries based on 10 political variables. Six segments are identified; these political groups implicate the access to different levels of economic and human development. In this study evidence of a positive but not perfect relationship between democracy and economic and human development is observed, thus presenting new insights for the understanding of the heterogeneity of behaviors relatively to political indicators.
    Keywords: Democracy, Economic Development, Fuzzy k-means
    JEL: C21 C61 O10 O57
    Date: 2005–07
  3. By: Huang, Yasheng
    Abstract: Using the data from World Business Environment Survey (WBES) on over 10,000 firms across eighty one countries, this paper finds preliminary evidence that foreign firms enjoy significant regulatory advantages - as perceived by the firms themselves - over domestic firms. The findings on regulatory advantages of foreign firms hold with a variety of alternative measures of regulations and with or without firm- and country-level attributes and industry and country controls. There is also evidence that foreign firms' regulatory advantages are especially substantial vis-a-vis the politically weak domestic firms. Furthermore, the regulatory advantages of foreign firms appear stronger in corrupt countries than in non-corrupt countries.
    Keywords: Foreign Firms, Regulatory Advantages, World Business Environment Survey,
    Date: 2005–06–03
  4. By: Samia Tavares (Rochester Institute of Technology)
    Abstract: Corruption scandals seem to abound in countries that have recently undergone reform. Despite the proliferation of stories in the news media, no one has examined whether reform—be it democratization or economic liberalization or both—actually causes an increase in corruption. Theory provides no guidance as to the direction of causality—on the one hand, reforms make politicians accountable to voters, as well as introduce more competition, which should decrease corruption. On the other hand, the need for politicians to now raise campaign funds, as well as the increased availability of rents that results from economic liberalization provides for an incentive for corruption. This paper uses the numerous cases of democratizations and economic liberalizations that occurred in the 80s and 90s to examine this issue. The paper finds that democratizations reduce corruption, while liberalization may actually increase corruption. Furthermore, undertaking both reforms in rapid succession actually leads to a decrease in corruption, while countries that democratized more than 5 years after liberalizing experienced an increase in corruption.
    Keywords: corruption; liberalization; government; democracy
    JEL: D72 D73 H11 H77 K42
    Date: 2005–07–06
  5. By: Nils Soguel (IDHEAP); Alexandre Tangerini (IDHEAP)
    Abstract: The normative literature on fiscal federalism generally recognises the need for fiscal equalisation mechanisms to facilitate the mitigation of inequities in the distribution of resources. The question of how far to go in matters of fiscal equalisation is a very sensitive one. Choices in this area reflect the prevailing social norms and the political debates, in the context of which these norms are expressed. Moreover, the political debates are characterised by the usual tensions between selfish and altruistic visions of society. The empirical part of this contribution analyses the results of two referenda recently held in the Canton of Vaud in Switzerland. It provides explanatory models for both ballots (acceptance rate of the propositions in each municipality). The model’s explanatory variables show that the people of Vaud’s voting behaviour was basically selfish. The widespread belief that voters are capable of altruism in this particular area is, therefore, rejected.
    JEL: D6 D7 H
    Date: 2005–07–08
  6. By: Marcela Eslava
    Abstract: Theoretical models of the political budget cycle suggest that electoral manipulation of government expenditures can take the form of changes in the composition of spending, without impacting the overall budget or the deficit, and that the form and extent of this manipulation depend on the fiscal preferences of voters. In this paper, I use data on government expenditures and election outcomes in Colombia to provide an integrated analysis of voting behavior and the preelectoral dynamics of government spending. I emphasize potential changes in the composition, rather than the size, of the budget. I find that components of the budget that can be identified with targeted spending grow, and that non-targeted spending contracts, in the year preceding an election. Consistently, I find that voters reward the preelection increases in targeted spending, but punish incumbents who run high deficits before the election.
    Keywords: Political Budget Cycle
    JEL: D72
    Date: 2005–02–15
  7. By: Plechanovová, Bela
    Abstract: A priori voting power analysis can provide an effective tool for assessment of decision-making rules, which is particularly needed in procedures using weighted voting. The Council of the EU is such a case and the decision-making rule for this main decision-making body is a long-lasting problem of the European Union. This article aims at designing an equitable and politically acceptable solution to this problem while at the same time provides a comparison of the qualities of the proposed rule with the rule as given by the Treaty of Nice, by the Draft Treaty on Constitution and by another proposal, which was presented as an optimal solution.
    Keywords: Nice Treaty; Constitution for Europe; Council of Ministers; qualified majority; majority voting; political science
    Date: 2004–09–23
  8. By: Schäfer, Armin
    Abstract: This paper looks at the introduction of the Open Method of Coordination (OMC) to EU policy-making. This new mode of governance has been developed over the last decade and has received considerable attention in the literature. However, much of this writing fails to put the OMC into the broader context of EMU; in contrast, this paper links the Amsterdam employment title to the prior Maastricht decision to form a monetary union. It seeks to contribute to the literature on European integration in two ways: First, this paper offers three refinements to Pierson's historical institutionalist account of European integration. Second, it thus provides an alternative to functional explanations of the OMC. In brief the argument is that a conservative-liberal coalition at Maastricht created hard law in fiscal and monetary policy to constrain its successors, while the social democratic majority at Amsterdam relied on soft law to promote its goals in employment and social policy. While the former effectively limited later policy-choices, the latter largely avoids sovereignty losses for national governments. The contents of the Employment Title were determined by EMU, its form – the OMC – by social democratic reluctance to transfer power to the EU.
    Keywords: institutionalism; open coordination; social democracy; EMU; employment policy; Maastricht Treaty; Amsterdam Treaty; political parties; political science
    Date: 2004–09–23
  9. By: Leal-Arcas, Rafael
    Abstract: This paper is a comparative institutional analysis of the EC's decision-making process in trade policy by focusing on three variables, i.e., competence (whether national or EC competence in EC trade policy), control (who controls the EC's position in international trade negotiations: the Commission or the EU Member States?) and efficiency versus accountability (technocratic versus democratic trade policy) at the national and supranational levels. The empirical background is the World Trade Organization, to which the EC and its Member States are members and, more precisely, the Doha Development Agenda, where the position of the EC is analyzed. The EC institutions and their interaction with EU Member States' institutions and trade policy is the core of this paper. The problems that the enlarged EU will face in its internal decision-making process (such as transparency, efficiency, accountability) can be paralleled to the WTO's decision-making process, and thus the European experience can be used as a role or guidance in the WTO forum so that we can learn from the EC's benefits and, more importantly, avoid the mistakes of the European experience in the decision-making process of international trade fora . The paper concludes that EC trade policy, as well as WTO rules and policies, need to change to become more efficient and accountable at the same time as they address the issue of lack of transparency and legitimacy of the current system of governance, denounced by the Laeken European Council. Thus, more leadership is needed.
    Keywords: competences; international agreements; transparency; international trade; common commercial policy; trade policy; accountability; institutions; European Commission; European Parliament; Council of Ministers; WTO; political science; law
    Date: 2004–09–23
  10. By: Besson, Samantha
    Abstract: Never has sovereignty been as fashionable as since its explanatory and normative force first came into doubt and its knell was tolled in the European Union. With the shift in authority away from the state to new sub-state, supra-state, post-state and non-state entities, an important question is whether the concept of ultimate authority or sovereignty is to be abandoned or, on the contrary, retained and, if so, in which form. This paper aims at exploring a third way that would allow us to escape from the two types of dualism that contrast state and sovereignty, first, and rejecting and saving sovereignty, second. This paper's argument is that sovereignty is neither the simple reflection of the new European and international reality nor the application of a pre-established concept whose criteria are immutable and risk corseting the post-national order. As an essentially contestable concept, sovereignty is at once a state of affairs, a question pertaining to the nature and justification of that state of affairs and a justification of the latter. The correct use of the concept of sovereignty consists therefore in constantly contesting one's conceptions of the concept and hence one's exercize of sovereignty. As such, the reflexive concept of sovereignty can be described as cooperative in the post-national constellation where sovereign entities overlap in their claims to sovereignty over the same territory and population. Read together with the principle of subsidiarity, cooperative sovereignty implies allocating competences to those authorities that are best placed to ensure the protection of shared sovereign values and principles, such as the values of democracy and fundamental rights. In the European context, cooperative sovereignty provides the normative framework for the development of a dynamic and reflexive form of constitutionalism. Through its duties of cooperation and coherence, cooperative sovereignty countervails the risks of erosion implied by constitutional pluralism, while also enhancing the legitimacy of the European polity. This can be observed in the context of difficult issues such as constitutional conflicts, legislative cooperation and, finally, multi-level constitutionalism.
    Keywords: sovereignty; supremacy; subsidiarity; polity building; multilevel governance; legitimacy; democracy; fundamental/human rights; constitution building; national parliaments; European Convention; political science; law
    Date: 2004–09–23
  11. By: Radaelli, Claudio M.
    Abstract: Is there something new in recent research on Europeanisation? Or should we go back to what we already know about political integration in Europe and avoid the term? This article reviews recent work in four steps: the identification of the specific domain of Europeanisation; the relationship between Europeanisation, on the one hand, and governance, institutions, and discourse, on the other; the methodological problems and the models emerging in this new field of research; and an assessment of the results arising out of theoretical and empirical research. One theme throughout the article is that, in order to develop a progressive agenda, Europeanisation should be seen as a problem, not as a solution. It is neither a new theory, nor an ad-hoc approach. Rather, it is a way of orchestrating existing concepts and to contribute to cumulative research in political science. Europeanisation does not provide any simple fix to theoretical or empirical problems. Quite the opposite, it can deliver if approached as a set of puzzles. A problem in search of explanation – not the explanation itself (Gualini 2003). The conclusion is that Europeanisation has contributed to the emergence of new insights, original explanations, and interesting questions on three important issues: the understanding and analysis of 'impact', how to endogeneise international governance in models of domestic politics, and the relationship between agency and change. These three issues are prominent in the research agendas of international relations, theoretical policy analysis, and comparative politics. To contribute to major issues at the core of political science is a valuable result for a relatively new field of inquiry.
    Keywords: Europeanization; governance; regulation; political science
    Date: 2004–10–06
  12. By: Howarth, David
    Abstract: Four overlapping analytical frameworks focusing upon domestic British politics are applied to explain the detailed development of the policy on the euro maintained by the Conservative Government then Party in opposition and the Labour Party opposition and then Government: intra-party politics; inter-party politics; public opinion and the nature of British democracy; and neo-pluralism (competing economic and other interests). This article posits that British government - and in particular Labour Government - reluctance to hold a referendum on euro membership and actively push a pro-euro policy can be best explained in terms of ideologically infused intra- (rather than inter-) party politics and the realities of pluralist politics, while explanations rooted in an analysis of public opinion are less helpful.
    Keywords: U.K.; Euro; EMU; media; pluralism; political parties; public opinion; national autonomy; political science
    Date: 2004–10–06
  13. By: Dür, Andreas; Mateo, Gemma
    Abstract: A comparison of the results of the six most recent Intergovernmental Conferences (IGCs) in the European Union (EU) indicates that member governments' success in achieving substantial compromises based on issue linkages differs across cases. An examination of supranational and intergovernmental bargaining theory shows that both fail to provide a satisfactory explanation for this variation. Instead, we argue that the problem that all participants to a negotiation have an incentive to maximise individual rather than overall gains often leads to efficiency losses. In IGCs, EU member states established two procedures to surmount this problem: a preparatory phase precedes the actual negotiations, and the Council presidency acts as a mediator in the negotiations. Lack of time for preparation, a biased presidency, or external shocks that reduce the capacity of the presidency to guide the negotiations, however, can cause efficiency losses in IGCs since under these conditions the two procedures fall short of facilitating bargaining efficiency. In an empirical analysis of all IGCs from the Single European Act to the Constitutional Treaty, we find support for our argument.
    Keywords: Amsterdam Treaty; constitution building; European Convention; European Council; IGC 1996; IGC 2000; intergovernmental conferences; intergovernmentalism; Maastricht Treaty; Nice Treaty; treaty reform; political science
    Date: 2004–10–12
  14. By: Kaur Rupinder; Maheshwari Sunil Kumar
    Abstract: In this study we examine the issue of the need of labour reforms in the globalised economy. The two legislations discussed in detail are: Chapter VB of Industrial Disputes Act, 1947- provisions relating to layoff, retrenchment and closure of industrial establishments and provisions regarding abolition and regulation of contract labour in Contract Labour (Regulations and Abolition) Act, 1970. We have dealt the issue from multiple stakeholder (Trade Unions, Employers, Political Parties and the Government) point of view. We have listed their interests and the respective positions taken by them. Based on these observations, we have made certain suggestions and emphasized the need to take the balanced view and build consensus in the larger interests of the stakeholders.
    Date: 2005–07–07
  15. By: Edelman, Mark
    Abstract: The WTO decisions and evolving farm bill context appear to generate some opportunities for designing incremental and new policy mechanisms that would add to the incomes of farmers and rural people without further eroding the competitiveness of U.S. farmers by capitalizing direct payments directly into land values. Payment reform and diversification strategies could be designed to make an enhanced contribution to jobs, income, and economic growth rates in the Ag-dependent counties that have experienced slower jobs and income growth. Such criteria could be an important element in “red state/blue state” analyses by political scientists. Given the growing dependence of farmers on off-farm income and concerns about brain drain migration, development of community and regional approaches to stimulating new ventures by building community entrepreneurial capacity, identifying actionable migration strategies, and creating community mechanisms to attract local reinvestment of wealth transfer are likely to become increasingly important attributes in creating future opportunities for income, economic growth, and quality of life in rural America.
    Date: 2005–07–07

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