nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒11‒04
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Lobbying, Corruption and Political Influence By Campos, Nauro F; Giovannoni, Francesco
  2. The political economy of monetary policy conduct and central bank design By Manfred Gärtner
  3. Political Cycles : Issue Ownership and the Opposition Advantage By Gautier, P.; Soubeyran, R.
  4. A Theory of Rent Seeking with Informational Foundations By Lagerlöf, Johan N.M.
  5. Social Composition, Social Conflict, and Economic Development By Strulik, Holger
  6. Multidimensional Scaling with Regional Restrictions for Facet Theory: An Application to Levi's Political Protest Data By Groenen, P.J.F.; Lans, A. van der
  7. Trade Costs in the First Wave of Globalization By David S. Jacks; Christopher M. Meissner; Dennis Novy

  1. By: Campos, Nauro F; Giovannoni, Francesco
    Abstract: Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries.
    Keywords: corruption; institutions; lobbying; transition
    JEL: D72 E23 H26 O17 P16
    Date: 2006–10
  2. By: Manfred Gärtner
    Abstract: This paper provides a concise overview of the state of the art on monetary policy and central banking from a public choice perspective. It starts with a brief look at the roots of today’s view of monetary policy conduct and the design of pertinent institutions in early work on political business cycles, and then proceeds to a discussion of the inflationstabilization dilemma along with proposed solutions in the form of central bank independence and conservativeness, incentive contracts, and inflation policy targets. The last section addresses current developments. These include the proper choice of monetary policy targets, the role of New Keynesian and sticky-information aggregate-supply curves and the quest for simple and efficient rules for monetary policy that has been triggered by the proposal and widespread polularity of the Taylor rule.
    Keywords: Monetary policy, central banking, rules, discretion, stabilization, inflation, bias, public choice
    JEL: E31 E32 E52 E58
    Date: 2006–10
  3. By: Gautier, P.; Soubeyran, R.
    Abstract: We propose a two dimensional infinite horizon model of public consumption in which investments are decided by a winner-take-all election. Investments in the two public goods create a linkage across periods. We follow the idea of issue ownership introduced by Petrocik (1996) in considering parties with different specialties. We show that the incumbent party vote share decreases the longer it stays in power. The median voter is generally not indifferent between the two parties and, when she is moderate enough, no party can maintain itself in power for ever. This result holds when the parties' main objective is to win the election and is compatible with a large range of candidates sub-objectives, that may change from one election to the next. Finally, the more parties are specialized and the more public policies have long-term effects, the more political cycles are likely to occur. ...French Abstract : Nous proposons un modèle de consommation publique à horizon infini. Les investissements engagés dans la fourniture de deux biens publics sont déterminés par les élections. Ces investissements créent un lien entre les élections successives. Nous suivons l'idée introduite par Petrocik (1996) selon laquelle les partis "possèdent" certains thèmes, en considérant qu'ils ont des spécialités différentes. Nous montrons que la part des voix du parti au pouvoir décroît entre deux élections. L'électeur médian n'est généralement pas indifférent entre les deux partis et, lorsqu'il est suffisamment modéré, aucun parti ne peut se maintenir indéfiniment au pouvoir. Ce résultat est valide lorsque l'objectif principal des partis est de gagner l'élection et est compatible avec un grand ensemble de sous objectifs, qui peuvent changer d'une élection à l'autre. Finalement, plus les partis sont spécialisés et plus les politiques ont des effets de long terme, plus les cycles politiques sont susceptibles d'apparaître.
    JEL: D72 H41 C72
    Date: 2006
  4. By: Lagerlöf, Johan N.M.
    Abstract: I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.
    Keywords: competition; disclosure; information acquisition; rent seeking; welfare
    JEL: D42 D43 D72 D83 L13
    Date: 2006–10
  5. By: Strulik, Holger
    Abstract: This article shows within a simple growth model how the make up of society affects economic performance when property rights are unenforceable. It investigates behavior of non-cooperative social groups that consume, produce, and appropriate resources either peacefully or through contest. For the case of symmetric groups it is shown that economic growth is generated only in peaceful societies. For the case of asymmetric groups rebel-equilibria are investigated in which a large majority behaves peacefully although challenged by an aggressive minority. In each case it is shown how the possibility of conflict and its intensity and the rate of economic growth depend on social fractionalizaton, general productivity of the economy, and the ease at which resources are appropriated. A final part extends the analysis towards behavior of non-benevolent social elites.
    Keywords: Social Conflict, Social Fractionalization, Property Rights, Stagnation, Growth
    JEL: C73 D74 O11
    Date: 2006–10
  6. By: Groenen, P.J.F.; Lans, A. van der (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Multidimensional scaling (MDS) is often used for the analysis of correlation matrices of items generated by a facet theory design. The emphasis of the analysis is on regional hypotheses on the location of the items in the MDS solution. An important regional hypothesis is the axial constraint where the items from different levels of a facet are assumed to be located in different parallel slices. The simplest approach is to do an MDS and draw the parallel lines separating the slices as good as possible by hand. Alternatively, Borg and Shye (1995) propose to automate the second step. Borg and Groenen (1997, 2005) proposed a simultaneous approach for ordered facets when the number of MDS dimensions equals the number of facets. In this paper, we propose a new algorithm that estimates an MDS solution subject to axial constraints without the restriction that the number of facets equals the number of dimensions. The algorithm is based on constrained iterative majorization of De Leeuw and Heiser (1980) with special constraints. This algorithm is applied to Levi?s (1983) data on political protests.
    Keywords: Multidimensional Scaling;Constrained Estimation;Facet Theory;Axial Partitioning;Regional Restrictions;Iterative Majorization;
    Date: 2006–10–30
  7. By: David S. Jacks; Christopher M. Meissner; Dennis Novy
    Abstract: We use a new measure of total trade costs at the bilateral country level to examine the change in international trade integration between 1870 and 1913. Trade costs are lowest amongst the most developed countries and highest in the peripheral and poor countries. On average, our measure declined by roughly ten percent during the period declining most slowly in the richest countries. Core-periphery dyads saw the fastest declines. We sort the determinants of trade costs into four main categories: geographic, political, transportation/communications and institutional/cultural. We find that all of these factors play a role in explaining the variation in the data. Transportation costs and other factors related to proximity seem to explain the largest fraction of the variance. Membership in the British Empire and a shared language are also of great importance. Tariffs, and increased exchange rate regime coordination play a strong role too. Finally we find that reductions in trade costs explain roughly 40 percent of the global trade boom. Economic expansion accounts for the rest.
    JEL: F15 N70
    Date: 2006–10

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