Forms of democracy and economic growth volatility

Using a panel of 140 countries over the 1975–2007 period, we disaggregate democracies across five institutional dimensions (government forms, electoral rules, state forms, number of veto players, and age of democracies), to study the precise forms of democracy that may explain the lower economic growth volatility (EGV) in democracies compared to dictatorships, usually emphasized by the literature. We find that, while all government forms decrease EGV to the same extent, proportional electoral rules outperform majoritarian and mixed electoral rules, suggesting a role for a more inclusive political decision-making process. In addition, EGV is significantly lower in unitary states, suggesting a role for a limited separation of power between the central government and the local authorities, while the effect of the number of veto players and the age of democracies is significant only in developed countries. Consequently, the choice between various forms of democracy may not be neutral for EGV, and, possibly, for countries' development path.     

Revenue decentralization,central oversight and the political budget cycle: Evidence from Israel

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999–2009. We find that high dependence on central government transfers – as reflected in a low share of locally raised revenues in the municipality's budget – exacerbates political budget cycles, while tight monitoring – exercised through central government appointment of external accountants to debt accumulating municipalities – eliminates them. We also find that this pattern is predominantly accounted for by development expenditures. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government.     

Fiscal rules to tame the political budget cycle: Evidence from Italian municipalities

The paper provides evidence that fiscal rules can limit the political budget cycle. It uses data on Italian municipalities during the 2000s and shows that: 1) municipalities are subject to political budget cycles in capital spending; 2) the Italian sub-national fiscal rule (Domestic Stability Pact, DSP) introduced in 1999 has been enforced by the central government; 3) municipalities subject to the fiscal rule show more limited political budget cycles than municipalities not subject to the rule. In order to identify the effect, we rely on the fact that the domestic fiscal rule does not apply to municipalities below 5000 inhabitants. We find that the political budget cycle increases real capital spending by about 10–20 percent on average in the years prior to municipal elections and that municipalities subject to the DSP show a pre-electoral increase in capital spending which is only a quarter of the one of municipalities not subject to the rule.     

When do more selfish politicians manipulate less,not more?

We model the political manipulation of deficits in a political budget cycle model. Assuming that a share of voters suffers from debt illusion the incumbent can increase her re-election chances by expanding government spending. However, the optimal manipulation may exceed the amount necessary to maximize re-election chances (over-manipulation) if the deficit is not very costly (low repayment obligation). Then, more selfish politicians (higher ego rents and, therefore, increased re-election motivation) reduce the over-manipulation. Conversely, “excessive” spending may wrongly be interpreted as opportunistic government manipulation. Theoretical results are supported empirically, with very robust evidence in a sample of 87 democracies.     

Are Democracies Cleaner?

We inquire whether democracies enjoy lower pollution levels than autocracies by investigating the ‘clean democracy hypothesis’, which posits that democracies have a more demand-determined policy formation leading to more stringent environmental policies. We test this hypothesis with a large data set covering 137 countries and the period 1970–2012 using eleven different air pollutants as endogenous variables and a wide range of control variables measuring democracy, development stage, globalization, and factor endowments. We find no consistent evidence that democracies are cleaner, not even the richer ones, which casts doubt on the validity of single pollutants studies. Numerous checks show the robustness of our results.     

Does democratization spur growth?

Many studies have considered how democratization affects economic growth. We expand this work by allowing short‐ and long‐run effects of democracy upon growth to differ since effects during political transitions need not coincide with those under established democracies. We also allow these short‐ and long‐run effects to differ across world regions since history, demography and geography vary across regions. Using annual, cross‐county data from 1960 to 2010, we find that democratizations increased growth rates in sub‐Saharan Africa both in the short run and in the long run but lowered them in Europe. Effects in other regions appear less strong. Our results suggest that democracy could be most beneficial for growth in poorer, less stable regions. We also do not find any evidence of a transitional cost. Stronger evidence arises that these effects come from rising productivity rather than through greater investment. Finally, some support though mixed suggests that democracy's ability to mitigate the effects of ethnic heterogeneity provides a partial explanation for the cross‐regional heterogeneity.     

Rewarding the introduction of multiparty elections

Do aid donors reward the adoption of multiparty elections? Are multiparty elections rewarded in both democracies and electoral authoritarian regimes? How do the rewards for institutional reforms compare to the rewards for substantive improvements in governance and political rights? These questions are of particular interest given both the spread of democracy and the emergence of autocracies with multiparty elections for the executive and legislature as the modal form of authoritarianism. To answer these questions, we examine temporal dynamics in aid flows before and after transitions to multiparty elections and the strategic allocation of aid rewards to specific sectors depending upon electoral competition and substantive improvements in governance and political rights. We find that, in the post-Cold War era, bilateral and multilateral donors reward the adoption of multiparty elections in both democracies and electoral authoritarian regimes while also rewarding substantive improvements in governance and political rights. Sector specific analyses reveal that multiparty elections are rewarded with greater democracy aid and economic aid in both democratic and electoral authoritarian regimes. Nevertheless, the quality of elections matters: the adoption of democratic elections receives greater aid gains than the adoption of authoritarian elections.     

Ethnicity, Politics and Economic Performance

The paper investigates the effects of ethnic diversity on economic performance. Previous studies have found that diversity has various detrimental microeconomic effects, tending to reduce public sector performance, and has large detrimental effects on the overall growth rate. I develop a simple model of the effect of ethnic diversity on a government decision problem in which there is a tradeoff between growth and distribution, in the contexts of democracy and dictatorship. I find that in democracy ethnic diversity has no effect upon the decision, whereas in dictatorship ethnic diversity leads to a government choice which reduces the growth rate. I then test these propositions on two data sets. The first is for 94 countries over the period 1960–1990. I find that whether diversity adversely affects overall economic growth depends upon the political environment. Diversity is highly damaging to growth in the context of limited political rights, but is not damaging in democracies. The second is for World Bank projects in 89 countries. I find that the same relationship between diversity and democracy affects the proportion of projects which are successful.     

Political budget cycles: Evidence from Italian cities

The introduction of a new real estate taxes in Italy in 2011 provides a natural experiment, which is useful to test for political budget cycles. The new real estate tax allowed discretion to local governments. This generates a random variation in the distance of municipalities from the following elections when they choose the level of the tax rate. We do find substantial evidence of political budget cycles, with municipalities choosing lower tax rates when close to elections. We observe this budget cycle for smaller municipalities where the tax was more likely to be the single most important issue for the local government. Cities close to elections with large deficits did not set lower rates and so did municipalities with a lower average value of properties. Finally, the political budget cycle is stronger in the South.     

A few signatures matter: Barriers to entry in Italian local politics

Competition for public office is an essential feature of democracy but having many candidates competing for the same position might lead to voter confusion and be counterproductive. In current democracies, ballot access regulations limit citizens’ right to become candidates, seeking to balance this trade-off by discouraging frivolous contenders. This paper examines the causal effect of signature requirements – a widespread ballot access regulation – and finds that their impact goes beyond this goal. I use data on Italian local elections and apply a regression discontinuity design (RDD) to estimate the effects of these requirements on electoral competition, candidates’ selection, voter participation and administrative efficiency. I find that signature requirements reduce the number of candidates running for office, decrease electoral competition, lead to a more experienced pool of candidates, and reduce voter turnout. The positive effects of this policy are observed in municipalities with fragmented political systems, where signature requirements lead to fewer wasted votes and fewer spoiler candidates. The downside is observed in municipalities with concentrated political systems: signature requirements increase the frequency of uncontested races and reduce voter participation. Findings reveal how this barrier to entry impacts key dimensions of democracy and indicate that designing efficient electoral institutions requires a clear understanding of local political contexts.     

Democracy,rent seeking,public spending and growth

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a ‘U’ effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an ‘inverted-U’ effect in relation to democracy. We find fairly robust supportive evidence for the latter.     

Political budget cycles,incumbency advantage,and propaganda

This paper combines incumbency advantage and political budget cycle theory. An opportunistic politician is given two instruments: deficit‐financed transfers and propaganda. Unlike earlier analytical models, but in accordance with the empirical literature, government manipulations do actually improve re‐election chances. However, the optimal level of government manipulation depends on country characteristics, in particular the competence dispersion among potential candidates. This may explain why it is easier to detect political budget cycles in, for instance, developing countries or new democracies. Results are robust to alternative competence distribution and propaganda cost assumptions.     

自然权利·政治正当性·宪政——西方宪政民主政体的理念脉络探析

本文从政治哲学角度考察自然权利、政治正当性与宪政三要素的基本涵义及其逻辑关系，意在探析西方宪政民主政体的理念脉络。文章的基本论点是，在西方政治体系中，自然权利理念不仅为统治与被统治关系的政治正当性提供根本依据，更作为宪政民主政体的基本规范为宪政、民主及法治的正当程序奠定基础。     

Unbundling democracy: Political rights and civil liberties

Much recent political economy and political science literature views democracy in terms of political rights. This view, often referred to as electoral democracy, is particularly pronounced in the empirical literature. We reincorporate the role of civil liberties, which are at the core of modern democracy, in two ways. We identify four fundamental sources of potential differences in the evolution of political rights and civil liberties. We present systematic, robust and varied empirical evidence on the direct impact of two of these potential sources of differences using cross-national panel data and accounting for the modernization hypothesis. We obtain two noteworthy empirical results: civil liberties exhibit greater persistence than political rights in affecting subsequent outcomes; and, our main result, civil liberties are complementary to political rights when affecting subsequent outcomes, while the reverse is not the case. Consequently, one must incorporate civil liberties as a determinant of electoral democracy. More generally, both dimensions must be considered to understand the setbacks recently experienced by many democracies, despite their holding of free and fair elections.     

LEGISLATOR INCENTIVES IN A FRAGILE DEMOCRACY: EVIDENCE FROM BUDGET ALLOCATION IN THAILAND

This article investigates if legislators in a fragile democracy share the same local benefit seeking incentives that are observed among politicians in mature democracies. Fledgling democracies are characterized by uncertainty over the survival of democratic institutions, which may discourage elected officials' reelection effort in favor of more direct measures to gain personal payoffs. Analyses of the relationship between legislative representation and the allocation of the budget among Thailand's 76 provinces indicate that Thai legislators are directing government expenditure to their home provinces. This result suggests that politicians' self‐serving motives play an important allocation role even in a young, fragile democracy.(JEL D72, H59)     

Democracy, collective action and intra-elite conflict

We analyze a model where there is uncertainty about the future power of two ex-ante symmetric elites to appropriate surplus, and ex-ante surplus sharing agreements are not binding. We show that in an oligarchy, the stronger elite appropriates the entire available surplus, whereas a democracy results in a more balanced surplus allocation between the two elites. In a democracy, the newly enfranchised non-elite organize to act collectively, so that the weaker elite can credibly threaten to form a coalition with the organized non-elite against the stronger elite. Such a threat ensures that the more balanced surplus sharing proposal chosen by majority voting is renegotiation-proof. Therefore, sufficiently risk-averse elites unanimously choose democracy as a form of insurance against future imbalances in relative power. We emphasize that franchise extension to, and low cost of organizing collective political activity for, the non-elite are both necessary features of a democracy. Our formal analysis can account for the stylized facts that emerge from a comparative analysis of Indian and Western European democracies.     

The Role of Regime Type in the Political Economy of Foreign Reserve Accumulation

Authoritarian regimes have surpassed democracies in foreign reserve accumulation since the Asian Financial Crisis. Two prominent institutionalist theories could explain this diverging trend in reserves: First, the political business cycle theory, suggesting that reserves are reduced before an election. Second, the veto player theory, implying that a high number of veto players increases the de facto independence of central bankers, who are reluctant to invest in reserves. A time-series cross-sectional analysis for up to 182 countries over the period 1990–2013 shows that democratic governments tend to reduce their reserves before elections. While veto players do not affect reserves directly, a high number of veto players tends to limit a political business cycle before an election. Elections and veto players do not have an influence in authoritarian regimes. Election cycles tend to explain why democracies have relatively fallen behind in a period of massive reserve accumulation.     

Natural resources and the tradeoff between authoritarianism and development

Why do African and Middle Eastern countries seem cursed by an abundance of natural resources yet USA, Australia and Norway seem blessed? A growing literature has argued that the benevolence or malignance of natural resources depends upon the quality of institutions. This paper offers a new explanation based on associational freedom and its interaction with the political system. The model predicts that natural resources have an adverse impact on economic performance and transition to democracy in authoritarian regimes but not in democracies. It also predicts that repression of associational freedom will be increasing in natural resources in authoritarian regimes. I test the model's predictions using fixed-effects regressions on an international panel from 1975 to 2000 and find support.     

Political Dynasties

Political dynasties have long been present in democracies, raising concerns that inequality in the distribution of political power may reflect imperfections in democratic representation. However, the persistence of political elites may simply reflect differences in ability or political vocation across families and not their entrenchment in power. We show that dynastic prevalence in the Congress of the U.S. is high compared to that in other occupations and that political dynasties do not merely reflect permanent differences in family characteristics. On the contrary, using two instrumental variable techniques we find that political power is self-perpetuating: legislators who hold power for longer become more likely to have relatives entering Congress in the future. Thus, in politics, power begets power.     

Politics and Income Inequality: Does Politics Still Matter in New Democracies

Does politics still matter for reducing income inequality in new democracies? The standard explanation is that political institutions, in particular the left government and proportional representation, are negatively associated with income inequality among advanced industrial countries, but there have been so few studies attempting to explain the variation of distributional outcomes across new democracies. This article tests the hypotheses about the effects of political institutions on income inequality with unbalanced pooled time-series cross-sectional data that cover 26 fledgling democracies for 1975–2006. The evidence presented here suggests that, other things being equal, a parliamentary system and PR are substantially more likely to be associated with lower levels of income inequality, but a left government and more years of democracy do not appear to be related to lower income inequality.