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on Positive Political Economics |
| By: | Davide Debortoli; Ricardo Nunes |
| Abstract: | We analyze how public debt evolves when successive policymakers have different policy goals and cannot make credible commitments about their future policies. We consider several cases to be able to disentangle and quantify the respective effects of imperfect commitment and political disagreement. Absent political turnover, imperfect commitment drives the long-run level of debt to zero. With political disagreement, debt is a sizeable fraction of GDP and increasing in the degree of polarization among parties, no matter the degree of commitment. The frequency of political turnover does not produce quantitatively relevant effects. These results are consistent with much of the existing empirical evidence. Finally, we find that in the presence of political disagreement the welfare gains of building commitment are lower. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:938&r=pol |
| By: | Aidt , T.S.; Franck, R. |
| Abstract: | This paper suggests a new approach to analyze the causes of franchise extension. Based on a new dataset, it provides a detailed econometric study of the Great Reform Act of 1832 in the United Kingdom. The econometric analysis yields four main results. First, modernization theory only receives mixed support. Second, the reform enjoyed some measure of popular support. Third, the threat of revolution had an asymmetric impact on the voting behavior of the pro-reform Whigs and the anti-reform Tories. While the threat might have convinced reluctant reformers among the Whig politicians – and among their patrons – to support the bill, it seems to have hardened the resistance to reform among the Tories. Fourth, ideology played a critical role. However, it also appears that self-interest and political expedience explained the votes of many Members of Parliament. |
| Keywords: | Franchise extension; democratization; The Great Reform Act. |
| JEL: | D7 H1 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0832&r=pol |
| By: | Mary Lovely; David Popp |
| Abstract: | Countries who adopted regulation of coal-fired power plants after 1980 generally did so at a much lower level of per-capita income than did early adopters -- poor countries regulated sooner. This phenomenon suggests that pioneering adopters of environmental regulation provide an advantage to countries adopting these regulations later, presumably through advances in technology made by these first adopters. Focusing specifically on regulation of coal-fired power plants, we ask to what extent the availability of new technology influences the adoption of new environmental regulation. We build a general equilibrium model of an open economy to identify the political-economy determinants of the decision to regulate emissions. Using a newly-created data set of SO2 and NOX regulations for coal-fired power plants and a patent-based measure of the technology frontier, we test the model's predictions using a hazard regression of the diffusion of environmental regulation across countries. Our findings support the hypothesis that international economic integration eases access to environmentally friendly technologies and leads to earlier adoption, ceteris paribus, of regulation in developing countries. By limiting firms' ability to burden shift, however, openness may raise opposition to regulation. Our results suggest that domestic trade protection allows costs to be shifted to domestic consumers while large countries can shift costs to foreign consumers, raising the likelihood of adoption. Other political economy factors, such as the quality of domestic coal and election years, are also important determinants. |
| JEL: | F18 O33 Q53 Q55 Q56 Q58 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14286&r=pol |
| By: | Alberto Alesina; Richard Holden |
| Date: | 2008–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:122247000000002358&r=pol |
| By: | Peter Michaelis (University of Augsburg, Department of Economics); Thomas Ziesemer (University of Augsburg, Department of Economics) |
| Abstract: | Policy diffusion refers to the process by which a political innovation – like the introduction of a novel emission tax – disseminates over time among countries. In order to analyze this issue from an economic point of view we develop a simple two-country-model of the taxation of emissions in presence of (possible) policy diffusion. Contrary to the usual Nash setting of simultaneous decision making we consider a Stackelberg game: In the first step the domestic government introduces an emission tax td thus acting as Stackelberg-leader, in the second step the foreign government decides whether or not to introduce an emission tax tf and in the third step the firms decide on their output quantities to be sold on a third country’s market. For the case of an exogenous given probability of policy diffusion we show that the optimal domestic tax rate is c.p. the higher, the higher the probability of policy diffusion is. Moreover, we explore under which conditions first-mover behaviour by the domestic government leads to a higher tax rate compared to the Nash solution In the next step we introduce an endogenous probability of policy diffusion by combining our model with a strategic lobbying approach. As a result, the probability of policy diffusion is c.p. the smaller, the higher domestic tax rate td is. Consequently, in fixing the optimal tax rate the domestic government has to account for the foreign firm’s lobbying activities otherwise it will choose a tax rate too high. |
| Keywords: | emission taxes, first-mover behaviour, strategic environmental policy, policy diffusion |
| JEL: | F18 Q55 Q58 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0302&r=pol |