nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒10‒13
six papers chosen by
Eugene Beaulieu
University of Calgary

  1. Public Sector Capital and the Transition from Dictatorship to Democracy By Christopher J. Ellis; John Fender
  2. Deducing Varieties of Capitalism By Carney, Richard
  3. Simulating voting rule reforms for the Italian parliament. An economic perspective By Ottone, Stefania; Ponzano, Ferruccio; Ricciuti, Roberto
  4. The power mapping tool: a method for the empirical research of power relations By Schiffer, Eva
  5. Governance indicators : where are we, where should we be going ? By Kraay, Aart; Kaufmann, Daniel
  6. Foreign direct investment and bilateral investment treaties, an international political perspective By Rodolphe Desbordes; Vincent Vicard

  1. By: Christopher J. Ellis; John Fender
    Abstract: A model where a dictator decides on both the level of public-sector capital and whether to democratize is constructed. Under dictatorship the labor market is monopsonistic; democratization involves instituting a competitive labor market. Workers sometimes have a credible threat of revolution and this may affect the dictator’s investment decision; it may also induce democratization. The possibility of a “political development trap”, where the dictator stifles development to stay in power, emerges. The model is used, inter alia, to explain the effects of the 1832 Reform Act in the UK and the worldwide positive correlation between income and democracy.
    Keywords: Democracy, dictatorship, public sector capital, franchise extension, revolution
    JEL: H54 O43
    Date: 2007–08
  2. By: Carney, Richard
    Abstract: One of the key criticisms made of the Varieties of Capitalism perspective advanced by Hall and Soskice (2001) is that it is functionalist. Here, I offer a deductive model of capitalism that is consistent with their framework. Specifically, I deduce the structure of nations' capitalist institutions based on distributive welfare gains to those actors representing an economy's main factors of production - land, labor, and capital. Based on the coalitions and political battles that may be fought among these actors, I derive seven capitalist ideal-types that fall along the LME-CME spectrum.
    Keywords: capitalism; political economy; financial institutions
    JEL: P10 N20 O57
    Date: 2007–09–11
  3. By: Ottone, Stefania; Ponzano, Ferruccio; Ricciuti, Roberto
    Abstract: The aim of this paper is to contribute to the debate about the electoral rules in Italy. In particular, we simulate some voting rules to test what is the best electoral system on the basis of a utility function that takes into account two indices – representativeness and governability. As long as governability is important, a mixed member system (75% plurality, 25% proportional representation) outperforms the others. Our tool is the software ALEX4.1.
    Keywords: Italian Parliament, electoral system, simulations
    JEL: A12 C88 D72
    Date: 2007–10
  4. By: Schiffer, Eva
    Abstract: "This paper presents an innovative participatory method to visualize, discuss and analyze the power of different actors in a given governance field. The Power Mapping Tool was first used to analyze the governance effects of Community-Based Natural Resource Management (CBNRM) in Namibia. This example is presented as a case study to show how the method works: The actors involved are represented by board game figures that are characterized through “range-of-action-cards” and put on wooden “power towers” to show their power in the governance field. The result is a three dimensional sketch that provides quantitative data and guides the qualitative discussion about reasons for and effects of the power of different actors. In the case of Namibian CBNRM Power Mapping helped to understand how power indeed had been devolved from the national to the local level. However, on the community level elite-capture was seen as a serious problem. In this research the Power Mapping Tool proved to be easy to use with a very diverse mix of interview partners and provided not only a wealth of data but also increased the interviewees' understanding of their own situation." from Authors' Abstract
    Keywords: Governance, Participatory methods, Decentralization, Natural resource management, Political power,
    Date: 2007
  5. By: Kraay, Aart; Kaufmann, Daniel
    Abstract: Scholars, policymakers, aid donors, and aid recipients acknowledge the importance of good governance for development. This understanding has spurred an intense interest in more refined, nuanced, and policy-relevant indicators of governance. In this paper we review progress to date in the area of measuring governance, using a simple framework of analysis focusing on two key questions: (i) what do we measure? and, (ii) whose views do we rely on? For the former question, we distinguish between indicators measuring formal laws or rules ' on the books ' , and indicators that measure the practical application or outcomes of these rules ' on the ground ' , calling attention to the strengths and weaknesses of both types of indicators as well as the complementarities between them. For the latter question, we distinguish between experts and survey respondents on whose views governance assessments are based, again highlighting their advantages, disadvantages, and complementarities. We also review the merits of aggregate as opposed to individual governance indicators. We conclude with some simple principles to guide the refinement of existing governance indicators and the development of future indicators. We emphasize the need to: transparently disclose and account for the margins of error in all indicators; draw from a diversity of indicators and exploit complementarities among them; submit all indicators to rigorous public and academic scrutiny; and, in light of the lessons of over a decade of existing indicators, to be realistic in the expectations of future indicators.
    Keywords: Governance Indicators,National Governance,Public Sector Corruption & Anticorruption Measures,Economic Policy, Institutions and Governance,Banks & Banking Reform
    Date: 2007–10–01
  6. By: Rodolphe Desbordes (IRES-UCL - [Université Catholique de Louvain]); Vincent Vicard (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: Most of the literature dealing with the location of foreign direct investment (FDI) has ignored the fact that multinational enterprises (MME) are not stateless and that their activities take place within an international political system : the return on their FDI can be influenced by the quality of interstate political relations between their home and host countries. This paper investigates whether the quality of interstate political relations between countries influences the volume of bilateral FDI. Thanks to the construction of a new indicator of the quality of interstate political relations, it is found that better interstate political relations foster bilateral FDI, through the signature of a bilateral investment treaty (BIT) may dampen the impact of their fluctuations. In addition, the effect of a variation in the quality of domestic institutions increases with the entry into force of a BIT, suggesting that the latter signals the credibility of an institutional improvement. Overall, when both indirect effects are considered, the entry into force of a BIT increases bilateral FDI stocks by 16%, on average, a lower impact than those found in previous studies. This effect nevertheless significantly differs according to the quality of both interstate political relations and domestic institutions.
    Keywords: Foreign Direct Investment, interstate political relations, bilateral investment treaties, institutions.
    Date: 2007–07

This nep-pol issue is ©2007 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.