The god of the poor: Economics and religion in Latin America

The new political economy struggles to incorporate political processes into economic models. Religious institutions and commitments might similarly be incorporated into models of personal and social choice. This essay explores appropriate modeling strategies and suggests areas in which religion may prove relevant to the design of economic policy, particularly in Latin America. The paper concludes with points of discussion in a hypothetical dialogue between a North American economist and a Latin American theologian.     

A demographic-economic explanation of political stability: Mauritius as a microcosm

"This paper examines current models of economic and political development--social modernization theory, political and economic characteristics of stable regimes, and cross country analysis of political stability--and tests them on the Indian Ocean Island of Mauritius. The analysis continues with a causal explanation for political stability in Mauritius' recent history, derived from an examination of economic policies and demographic patterns. Political change in Mauritius over the past sixty years seems to be explained best by a model for political stability which integrates specific economic and demographic factors. The model, applicable to development in other third world nations, revises Malthus' conclusion that population and economic conditions move in an oscillatory relationship and replaces it with a more comprehensive theory, suggesting that political stability is a function of both economic development and a repeating cyclical relationship between economics and population."     

What remains of the popularity function? The case of Austria

In this paper, the effects of changes in economic conditions on the popularity of political parties in Austria are investigated. According to the traditional theory of the popularity function, economic variables such as the rate of unemployment, the rate of inflation, and the growth rate of real disposable income exert direct influence upon voters' evaluations of political parties. Estimations of such popularity functions for Austria show that some effects of this kind can be found, but they seem to be unstable over time. On the other hand, models of political popularity based on the assumption of voters' rational expectations predict that only unexpected changes in economic conditions affect political popularity. One of these models seems to have favorable predictive properties for Austria.The authors are grateful to A. Kirschhofer-Bozenhardt (IMAS Linz) for providing the Austrian popularity data and to G. Kirchgässner for valuable comments on an earlier version of this paper. Financial support from the Ludwig Boltzmann-Institut zur Analyse wirtschaftspolitischer Aktivitäten is gratefully acknowledge. Sohbet Karbuz acknowledges support from the Institute for Advanced Studies, Vienna.     

The Political Economy of IMF Conditionality: A Common Agency Model

The paper models the relationship between an aid‐providing international financial institution (IFI) and an aid‐receiving government whose economic policy choices are influenced by a domestic interest group. Two assistance schemes are evaluated: conditional aid in which the IFI makes assistance contingent on less‐ distorting economic policies and unconditional aid which is provided without such conditions. Conditional aid is shown to raise welfare of the receiving country and the world as a whole relative to unconditional aid. The paper also examines how conditional and unconditional aid schemes are influenced by the IFI's opportunity cost of providing assistance and the receiving government's political dependence on a domestic interest group.     

Politico-economic inequality and the comovement of government purchases

This paper explores the implications of economic and political inequality for the comovement of government purchases with macroeconomic fluctuations. We set up and compute a heterogeneous-agent neoclassical growth model, where households value government purchases which are financed by income taxes. A key feature of the model is a wealth bias in the political aggregation process. When calibrated to U.S. wealth inequality and exposed to aggregate productivity shocks, such a model is able to generate weaker positive comovement of government purchases than models with no political wealth bias. The wealth bias that matches the cross-sectional campaign contribution distribution by income is consistent with the mild positive comovement of government purchases in the aggregate data. We thus provide an empirically relevant example where economic and political heterogeneity matter for aggregate dynamics.     

Delays of Inflation Stabilizations

In some new political economic models, delays of stabilizations result from coordination problems caused by collective choice-making mechanisms. Although several previous studies have tested the effects of political instability and fragmentation on seigniorage, deficits, or inflation, no direct tests of the influence of these factors on the delays of stabilizations have previously been undertaken. This paper reports the results of such tests. The degree of fragmentation of the political system and the level of inflation are identified as important determinants of the timing of inflation stabilizations.     

ECONOMIC DEVELOPMENT WITH ENDOGENOUS POLITICAL PARTICIPATION

This paper combines two approaches to the relationship between economics and politics. The first, standard in the economic literature, takes political arrangements as exogenous and examines the way in which different political regimes influence economic performance. A second approach, normally followed by political scientists, takes economic performance as exogenous and analyzes the way in which the political structure of society responds to it. I integrate both approaches in a simple model that provides a framework to think about the observed correlations between income per capita and political participation. Extensions to the basic model show the possibility of multiple equilibria, and are used to analyze totalitarianism and the role of urbanization.     

Electoral and welfare consequences of political manipulation of the economy

This paper examines the long-term electoral and welfare consequences of repeated strategies whereby a political office-holder induces cycles in economic variables to maximize his chances of re-election. Unlike other studies of political business cycles, we focus on questions of the desirability of these cyclical patterns and on the long-run properties of these political economic models. Noting that the welfare costs of vote maximizing in a single term extend beyond that term, we examine in detail the properties of the ‘long-run equilibrium path’ to which such cycles converge. If the economy starts above this path, vote maximizing can lead to increased social welfare and vote margins. However, if the economy starts below this path, vote-maximizing in the present can cause reduced votes and electocal defeat in subsequent terms. This possibility should lead a far-sighted, enlightened politician or political party to eschew vote-maximizing tactics and the political business cycles which accompany them and thus canhelp explain why empirical studies have not found convincing evidence of the existence of such cycles. This paper also quantifies the dependence of this long-run equilibrium path on the important political and economic parameters of the model.     

A Theory of Civil Conflict and Democracy in Rentier States*

The effects of resource rents on the political equilibrium have been studied in two main types of models. The first tradition uses models of conflict, and studies how resource rents affect the intensity and duration of civil conflict. The second tradition uses political economy models, where resource rents affect the political equilibrium due to changes in the costs and benefits of buying votes. Although they provide considerable insight, these traditions have little to say about when democracy emerges, and about when conflict emerges. In this paper, by integrating the earlier model traditions, we suggest the simplest possible framework we can think of to study the choice between conflict and democracy. We show how factors such as resource rents, the extent of electoral competition, and productivity affect economic and political equilibria.     

Home-market vs. vote-market effect: Location equilibrium in a probabilistic voting model

This paper considers the location of manufacturing activities when regional policies are endogenous. We find that once the political economy of regional policy is explicitly taken into account, regional population size has an ambiguous effect on the level of regional subsidy, even though it plays a key role in determining the equilibrium spatial allocation of industry. In particular, the final allocation of firms depends both on the relative economic strengths of the two regions, as predicted by more orthodox economic geography models, as well as by their relative political strengths.     

Did political constraints bind during transition?Evidence from Czech elections, 1990–20021

Many theoretical models of transition are driven by the assumption that economic decision making is subject to political constraints. In this paper we test whether the ‘winners’ and ‘losers’ of economic reform influenced voting behaviour in the first five national elections in the Czech Republic. We propose that voters, taking stock of endowments from the planning era, could predict whether they would become winners or losers of transition. Using survey data we measure the degree to which regions were ‘not afraid’ or ‘afraid’ of economic reform in 1990. We define the former as potential ‘winners’ who should vote for pro‐reform parties and the latter as potential ‘losers’ who should support left‐wing parties. Using election results and economic indicators at the regional level, we demonstrate that there is persistence in support for pro‐reform and communist parties which is driven by prospective voting based on initial conditions in 1990. We find that regional unemployment rates in 2002 are good predictors of voting patterns in 1990 and provide empirical evidence that political constraints bind during transition.     

Politico-economic models and cycles

Studies are surveyed analyzing the mutual interaction of economy and polity in an empirically testable way. A wide variety of assumptions are made concerning the behaviour of economic and political decision-makers–in particular voters and government, as well as the economic and political sectors. Representative models are discussed considering steady state equilibria and political business cycles, and empirical results are presented for the U.S., the U.K. and Germany. Finally, the potential and prospects of politico–economic modelling are discussed.     

An Economistic Interpretation of the Northern Ireland Conflict

Tullock (1971) demonstrated that the causes of political rebellion are perhaps more to do with private expected utility than collective discontent. There is much to suggest that pecuniary motivation plays a large part in the Northern Ireland (NI) conflict given the substantial amount of 'black market' activity which is present. This paper therefore puts forward an economic model of the NI paramilitaries blending their gangster and political activities which are commonly geared to earn revenue. From this model an explanation from an economic perspective emerges as to why a cease-fire may occur and why it is unstable. The implications of the model are then investigated, with particular reference to conflict solutions arising from the economic model rather than political diplomacy.     

Foreign aid and governance in Africa

This paper investigates the effect of foreign aid on governance in order to extend the debate on foreign aid and to verify common positions from Moyo’s ‘Dead Aid’, Collier’s ‘Bottom Billion’ and Eubank’s ‘Somaliland’. The empirical evidence is based on updated data from 52 African countries for the period 1996–2010. An endogeneity robust instrumental variable Two-Stage-Least Squares empirical strategy is employed. The findings reveal that development assistance deteriorates economic (regulation quality and government effectiveness) and institutional (corruption-control and rule of law) governance, but has an insignificant effect on political (political stability, voice and accountability) governance. While, these findings are broadly in accordance with Moyo and Collier on weak governance, they neither confirm the Eubank position on political governance nor the Asongu stance on the aid-corruption nexus in a debate with Okada and Samreth. The use of foreign aid as an instrument to influence the election and replacement of political leaders in Africa may have insignificant results. It is time to solve the second tragedy of foreign aid and that economists and policy makers start rethinking the models and theories on which foreign aid is used to influence economic, institutional and political governance in recipient countries.     

Brexit and the Politics of UK Growth Models

Brexit has reopened and repoliticised the debate about future growth models for the UK economy. This contribution argues that this debate is built around historically specific path dependencies that reflect the particular character of public debate about British political economy, while also suggesting that the debate around Brexit takes place at a very distinctive moment in the history of democratic capitalism in Europe. This combination gives the renewed politicisation a specific and perhaps perverse character. The paper considers how we should approach debates about growth models, paying particular attention to the importance of the politics of support. It suggests that recent debate about growth models has been largely subsumed within the politics of Brexit, which has politicised that debate, albeit through the emergent political economy frames that Brexit has provoked. The paper explores the ways in which the demise of three key props of European democratic capitalism – a sustained period of economic growth, a governing philosophy that subordinated the market to wider social purposes and strong political parties – play out in the context of Brexit and the search for a new politics of support.     

John Stuart Mill's utilitarianism and the social ethics of sustainable development

This paper considers the writings of John Stuart Mill in political philosophy and political economy as a prototype for ideals of a 'sustainable development' grounded in a norm of justice and social solidarity. Mill's conception of a just 'stationary state* of society is examined alongside his attempts to reconcile precepts of non-interference (individual freedom) and private property, with the constraints and obligations of social, economic, and ecological coexistence. It is shown that notwithstanding vaccillations, Mill ends up espousing an ethical norm of reciprocity and solidarity that is quite different from the premise of self-interest axiomatized in most economic models of competitive market economies. These intuitions about a duty of care complementary to the non-interference principle, when systematized, are shown to find a new contemporary application to questions of economic justice and environmental sustainability.     

The Impact of Globalization on the Structural Unemployment: An Empirical Reappraisal

This paper analyzes the direct effects of various measures of globalization on the structural unemployment in 87 countries for the period from 1991 to 2014. The model specifications are based on the Ricardian Comparative Advantage and the Heckscher–Ohlin models. It is found that one standard deviation increase in the trade openness approximately leads to 0.6 percentage point lower structural unemployment rate. The effects of economic, social, and political aspects of globalization on the structural unemployment are also negative, but they are found as statistically insignificant. The paper also implements various robustness checks and argues potential implications.     

DOES THE KYOTO PROTOCOL COST TOO MUCH AND CREATE UNBREAKABLE BARRIERS FOR ECONOMIC GROWTH?

We look to the literature on short-term cost models, long-term models based on endogenous growth, and long-term models that assume induced technical change, in order to demonstrate the current understanding of costs, which is the focus of the debate on abating climate change. Using these insights as well as other results—like the role of ancillary benefits and the lack of a relationship between decarbonization and economic growth—our contribution to this debate will be to help policy makers understand how economic analyses are conducted and how they should be used in the subsequent political discussions. (JEL Q52, Q54, Q58 )     

Economies of scale and trade policy: The median voter model revisited

Why do some political economy models perform so poorly in predicting actual trade policy? Do scale economies provide the missing puzzle to our understanding of the anti-trade bias? By integrating economies of scale in production, this paper theoretically reinstates the median voter model as in Mayer [Mayer, W. (1984). Endogenous tariff formation. The American Economic Review, 74, 970–985] as a suitable political economy model in predicting trade policy. The modified model generates the scope for the anti-trade bias and predicts that sometimes economic, rather than political, considerations may lead to restrictive trade.     

国有股权能够为民营企业带来好处吗?——基于中国上市公司的实证研究

民营企业家参政所产生的政治关联效应已受到广泛关注,但民营企业中的国有股权是否也具有政治关联效应还有待进一步证实.文章以中国民营控股上市公司为样本,研究了国有股权在民营企业中的政治关联效应和作用机制.研究发现:民营企业中的部分国有股权能够为其发展获取更多的经济资源与发展机会,因为国有股权可以依靠其与政府的体制关联为民营企业的发展提供声誉担保;与此同时,这些融资便利与经济资源能够进一步提升民营企业的经营业绩.文章拓展了公司政治关联领域的研究文献,为进一步全面理解中国经济转型时期政治关联对企业的影响提供了一个新的视角.