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on Positive Political Economics |
| By: | RIBONI, Alessandro; RUGE-MURCIA, Francisco |
| Abstract: | This paper develops a model where the value of the monetary policy instrument is selected by a heterogenous committee engaged in a dynamic voting game. Committee members differ in their institutional power and, in certain states of nature, they also differ in their preferred instrument value. Preference heterogeneity and concern for the future interact to generate decisions that are dynamically ineffcient and inertial around the previously-agreed instrument value. This model endogenously generates autocorrelation in the policy variable and provides an explanation for the empirical observation that the nominal interest rate under the central bank’s control is infrequently adjusted. |
| Keywords: | Committees, status-quo bias, interest-rate smoothing, dynamic voting |
| JEL: | E58 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montde:2006-02&r=pol |
| By: | Alvaro Forteza (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Mario Tommasi (Departamento de Economía, Universidad de San Andrés, Argentina.) |
| Abstract: | This paper provides an overview of the pro-market reform process in eight Latin American countries, based on country studies undertaken within the Understanding Reform project of the Global Development Network. After a brief presentation of the reform in Latin America and in the eight countries in the project, the paper addresses some key themes on the political economy of reform. We review the initial conditions of reform; the role played by technocrats and stakeholders; political participation; the peculiar shortcut to reform represented by "policy switches" (announcing something to do the opposite); some traditional topics in the literature on reform like sequencing, shocks and learning; the apparently key role played by local characteristics; the complex feedbacks between pro-market reforms and the political process; and the recent backlash against reform in Latin America. The paper ends with some remarks mostly on normative lessons from this experience. |
| Keywords: | Reform, Washington Consensus, Political Economy |
| JEL: | O54 O57 P16 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:2205&r=pol |
| By: | Paterson, Iain (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria) |
| Abstract: | Analysis of the Constitutional Treaty of the European Union shows that there is a serious discrepancy between the voting power gradient of Member States computed by the Shapley-Shubik and Banzhaf indices. Given the lack of compelling arguments to choose between these indices on purely axiomatic grounds, we turn to a probabilistic approach as pioneered by Straffin (1977) focusing on the probability distribution of voting poll outcomes. We present a unifying model of power indices as expected decisiveness, which shows that the defining feature of each approach is a particular distribution of the voting poll. Empirical evidence drawn from voting situations, in addition to a consideration of first principles, leads us to reject one of these approaches. The unified formulation allows us to develop useful related concepts of efficiency and blocking leverage, previously used solely by a 'Banzhaf' approach, for the case of Shapley-Shubik, and a comparison of results is shown. |
| Keywords: | Voting power indices, Power gradient, Coefficient of representation, Expected decisiveness, Efficiency, Blocking leverage, Constitution of the European Union |
| JEL: | C43 C71 D71 D81 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:187&r=pol |
| By: | Floden, Martin (Dept. of Economic Statistics, Stockholm School of Economics) |
| Abstract: | The Ramsey optimal taxation theory implies that the tax rate on capital income should be zero in the long run. This result holds even if the social planner only cares about workers that do not hold assets, or if the planner only cares about any other group in the economy. This paper demonstrates that although all households agree that capital income taxation should be eliminated in the long run, they do not agree on how to eliminate these taxes. Wealthy households would prefer a reform that is funded mostly by higher taxes on labor income while households with little wealth would prefer a reform that is funded mostly by high taxes on initial wealth. Pareto improving reforms typically exist, but the welfare gains of such reforms are modest. |
| Keywords: | optimal taxation; inequality; redistribution |
| JEL: | E60 H21 |
| Date: | 2006–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0623&r=pol |
| By: | Bjørnskov, Christian (Aarhus School of Business) |
| Abstract: | During the last 15 years, the social capital literature has grown rapidly. In particular after Robert Putnam’s (1993) study of regional governments in Italy, the interest among economists and politologists exploded as Putnam showed that the concept could be used in quantitative explanations of a series of social and economic phenomena. The early literature was unavoidably indiscriminate as to distinguishing between the various elements of social capital, but more recent literature has stressed the need to distinguish between the constituent elements of Putnam’s social capital concept, in particular emphasizing the role of social trust. This is in turn defined as the confidence people have that strangers, i.e. fellow citizens on whom they have no specific information, will not take advantage of them (Uslaner, 2002; Bjørnskov, 2006). Using the answers to the World Values Survey question “In general, do you think that most people can be trusted?”, the by now quite substantial literature has found that social trust is associated with a set of different macroeconomic outcomes: economic growth, the rule of law and overall quality of governance, corruption, education, the extent of violent crime and subjective well-being are all influenced by the propensity of people within any nation to trust each other. The questions are therefore where trust comes from and whether or not it can be affected by public policy. The answers to these questions seem to divide researchers into two camps: the optimists and the pessimists. The former group may be best represented by Knack and Zak (2002) who estimate the effects of education and the rule of law alongside a set of factors that cannot be influenced in the short to medium run. The pessimist group, on the other hand, does not find much of a role for policy as they argue that the empirical associations between social trust and e.g. education or rule of law reflect the reverse causal direction, i.e. that trust has caused part of the cross-country differences in these factors. The aim of this paper is to assess the impact of a number of the central factors proposed in the literature and sort out which of those factors are associated with social trust. Although it to some extent rests on earlier work in Uslaner (2002) and Bjørnskov (2005), the paper differs from earlier studies in using a much larger sample of countries and including extra factors. It moreover distinguishes between factors affecting individuals’ trust radii and social distance, respectively, and explores indirect effects. |
| Keywords: | trust; social capital; institutions; rule of law |
| JEL: | Z13 |
| Date: | 2006–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0086&r=pol |
| By: | Henry, TULKENS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Parkash, CHANDER (National University of Singapore) |
| Abstract: | In essence, any international environmental agreement (IEA) imples cooperation of a form or another; The paper seeks for logical foundations of this. It first deals with how the need for cooperation derives from the public good aspect of the externalities involved, as well as with where the source of cooperation lies in cooperative game theory. In either case, the quest for efficiency is claimed to be at the root of cooperation. Next, cooperation is considered from the point of view of stability. After recalling the two competing concepts of stability in use in the IEA literature, new insights on the nature of the gamma core in general are given as well as of the Chandler-Tulkens solution within the gamma core. Free riding is also evaluated in relation with the alternative forms of stability under scrutiny. Finally, it is asked whether with the often mentioned virtue of “self enforcement” any conceptual gain is achieved, different from what is meant by efficiency and stability. A skeptical answer is offered, as a reply to Barret’s (2003) attempt at giving the notion a specific content. |
| Date: | 2005–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2006003&r=pol |