DO INSTITUTIONS AFFECT CITIZENS' SELECTION INTO POLITICS?

Political economy has primarily paid attention to the principal‐agent relationship between citizens and politicians and the role of competition and institutions in disciplining political agents. However, as the electoral control of politicians and the credibility of policy commitments are limited, this perspective needs to be complemented with an economics of political selection that takes into account the heterogeneity in the quality of those elected to political office. We review the emerging literature, which investigates the institutional determinants of political selection. We discuss pay in politics, parties, their candidate selection procedures and electoral rules, institutions enhancing transparency in politics, and institutions which govern dual office holding in different branches of government. We argue that further comparative analyses are essential in order to gain an improved understanding of the impact that institutions have on political outcomes, not only via the channel of accountability, but also via the channel of selection.     

A policy-based rationalization of collective rules: Dimensionality,specialized houses,and decentralized authority

We offer a policy-basis for interpreting, justifying, and designing (3, 3)-political rules, a large class of collective rules analogous to those governing the selection of papers in peer-reviewed journals, where each referee chooses to accept, reject, or invite a resubmission of a paper, and an editor aggregates his own and referees’ opinions into one of these three recommendations. We prove that any such rule is a weighted multicameral rule: a policy is collectively approved at a given level if and only if it is approved by a minimal number of chambers — the dimension of the rule — where each chamber evaluates a different aspect of the policy using a weighted rule, with each evaluator’s weight or authority possibly varying across chambers depending on his area(s) of expertise. These results imply that a given rule is only suitable for evaluating finite-dimensional policies whose dimension corresponds to that of the rule, and they provide a rationale for using different rules to pass different policies even within the same organization. We further introduce the concept of compatibility with a rule and exploit its topological properties to propose a method to construct integer weights corresponding to evaluators’ possible judgments under a given rule, which are more intuitive and easier to interpret for policymakers. Our findings shed light on multicameralism in political institutions and multi-criteria group decision-making in the firm. We provide applications to peer review politics, rating systems, and real-world organizations.     

Electoral accountability and local government efficiency: quasi-experimental evidence from the Italian health care sector reforms

This paper evaluates the effect of two policy changes on the efficiency of Italian regional governments in the provision of health care services: first a change in the electoral system, second a process of fiscal decentralisation. The paper provides two main contributions: (1) a comprehensive analysis of the two main reforms that involved Italian regional governments and the health care sector during the 1990s, (2) the evaluation of the impact of the electoral reform in a quasi-experimental setting. Final results are in line with recent theoretical predictions that show a positive relationship between government efficiency and the electoral accountability enhanced by institutions such as electoral rules and fiscal decentralisation.     

From plurality rule to proportional representation

I consider the decision of a parliament that might change the electoral system from the plurality rule to proportional representation for forthcoming elections. Parties are office-motivated. They care about winning and about the share of seats obtained. I examine two different scenarios of how parties in government share the spoils of office: equally or proportionally to their share of seats. If the government is formed by a single party and parties expect that each party will obtain the same share of votes in the next election, the electoral rule will never be changed. Therefore, for a change to occur, the government should be formed by a coalition. I find that a change is more likely to occur when there is a larger number of parties and also when the spoils of office are shared equally among the members in the governing coalition. These results are extended to analyze the decision to change from a less proportional rule to a more proportional one.     

Electoral system,corporate political donation,and carbon emission intensity: Cross-country evidence

We examine the association between a country's electoral system and greenhouse gas (GHG) emission intensity of firms and explore whether this association is influenced by corporate political donation. The study draws on the neo-pluralist theory of power in society to examine how possible corporate influence in the electoral systems relates to corporate environmental performance. Using a cross-country panel dataset, we find that companies operating in countries using majoritarian electoral systems (MAJ), where corporations have a relatively low influence on election outcomes, are associated with lower GHG emission intensity than those in proportional electoral systems, after controlling for macro-economic factors and variations in firm characteristics. Further, our findings show that corporate political donation positively moderates the association between MAJ and GHG emission intensity. Our results suggest that corporations are likely to utilise political donations as a component of business strategy to ease the regulatory actions of the state on companies. The results are robust to alternative variable measurements and tests of sensitivity.     

Formal models of the political resource curse

By surveying formal models, I demonstrate that the political resource curse is the misallocation of revenues from natural resources and other windfall gains by political agents. I show that the curse always exists if political agents are rent-seeking, since mechanisms of government accountability, e.g. electoral competition, the presence of political challengers, and even the threat of violent conflict, are inherently imperfect. However, the scope for rent-seeking becomes more limited as the competition over political power that threatens the incumbent government becomes more intense.     

中国财政政策规则及其体制稳定性分析

本文构建了内生捕捉我国财政政策体制变化的财政规则,并对产出缺口稳定动机和债务稳定动机反应进行了分析。基于马尔科夫转换财政政策反馈规则的实证估计表明,不同体制下,财政赤字与政府债务和产出缺口之间存在不同的政策反应关系;与基于不变参数识别的规则相比,体制转换财政规则能更好地追踪我国财政赤字的时间序列行为。这意味着,假定财政政策体制总是固定的货币政策规则研究以及基于不变财政体制框架VAR度量财政政策冲击高频率效应的实证研究都应慎重。     

Forecasting government support in Irish general elections: Opinion polls and structural models

Election forecasting is a cottage industry among pollsters, the media, political scientists, and political anoraks. Here, we plow a fresh field in providing a systematic exploration of election forecasting in Ireland. We develop a structural forecast model for predicting incumbent government support in Irish general elections between 1977 and 2020 (the Iowa model). We contrast this structural model with forecasts from opinion polls, the dominant means of predicting Ireland’s elections to date. Our results show that with appropriate lead-in time, structural models perform similarly to opinion polls in predicting government support when the dependent variable is vote share. Most importantly, however, the Iowa model is superior to opinion polls in predicting government seat share, the ultimate decider of government fate in parliamentary systems, and especially significant in single transferable vote (STV) systems where vote and seat shares are not always in sync. Our results provide cumulative evidence of the potency of structural electoral forecast models globally, with the takeaway that the Iowa model estimating seat share outpaces other prediction approaches in anticipating government performance in Irish general elections.     

Predictability in sovereign bond returns using technical trading rules: Do developed and emerging markets differ?

The study examines the predictability of 48 sovereign bond markets based on a strategy of 27,000 technical trading rules. These rules represent four popular trading rule classes, they are: moving average, filtering, support and resistance, and channel breakout rules, with numerous variants in each class. Empirical results show that (i) investing in sovereign bond markets is predictable, based on the buy-sell signals generated by trading rules, with the predictability of the emerging Asian markets being significantly higher than those of the advanced markets; (ii) the predictability is generally higher when the US tightens its monetary policies or undergoes recession or a financial crisis; (iii) two-thirds of sovereign bond markets have a higher predictability when we use a machine learning algorithm to determine the best trading rule strategy; and (iv) the predictability of a sovereign bond market is higher when the economy has a less effective government, lower regulatory quality, lower degree of financial openness, higher political risk, lower income and faster real money growth. Our results suggest that shocks originating from US monetary policy or economic conditions could have a considerable spillover effect on sovereign bond markets, particularly the emerging Asian markets.     

State-controlled banks and income smoothing. Do politics matter?

This paper uses a new dataset to reassess the relationship between government ownership and income smoothing of commercial banks. We also evaluate how political connections affect the impact of government ownership on earnings management. We find that banks with more state-controlled shareholders located in developing countries tend to have more incentives to smooth income. The paper finds no significant difference in earnings manipulation between government-controlled and non-government banks in developed countries. Next, to investigate whether the income smoothing behavior of state-controlled banks is driven by political objectives, the paper tests whether this behavior widens during national election years; the results provide strong support for this conjecture. The magnitude of the income smoothing behavior also varies with different countries and electoral characteristics. These findings suggest that the political channel plays an important role in determining the income smoothing incentives of state-controlled banks, especially in developing countries.     

Measures of the Amending Power of Government and Parliament. The Case of Italy 1988–2002

On the basis of a unique data set consisting of all the amendments to the Italian financial laws from 1988 to 2002, we empirically test whether and how the amending power is an instrument of the parliament or of the government and whether the use of this power was modified by the change of the electoral system in 1994. We show that, in both electoral systems, governments controlled the agenda and parliaments never exploited this power to increase the deficits beyond the planned value. The structural break of the Italian budgetary policy was determined by the Maastricht fiscal rules.     

Is the tax administration just a money machine? Empirical evidence on redistributive politics

Personal income tax represents the main source of tax revenue in any developed country. In this paper, we analyse how efficiently this tax is administered in the Spanish case. While we find that the managerial (or net) efficiency of the tax administration was very high for the period 1993–2002 (95.9%), our main aim here is to identify the determinants of this. Interestingly, political factors are found to play a role. Specifically, the fear of losing a parliamentary seat in a region forces the tax authorities to reduce their efficiency in ensuring tax compliance in that region (“swing voter model”). Additionally, in those electoral districts where the central government obtains higher electoral support the efforts to collect taxes diminish (“core voter model”). However, the former political effect tends to disappear when the central government holds a sufficient majority in the central parliament. Thus, we find empirical evidence on redistributive politics in tax administration.     

Henry George's Perspective on War and Peace

This essay examines Henry George's perspective on war and peace. With justice added to the foundation in the way that Henry George proposes, the conditions of inequality and conflict that lead to war will no longer prevail. George saw that trade prohibitions furthered elite rule, militarization, and a worldview of “them” versus “us.” George's great contribution was to see how these big issues of War and Peace bore directly upon the constellation of rules governing the relationship of people to planet, humans to humus, earthlings to earth. Social arrangements not based on the fundamental and equal human right to the earth lead inevitably to a gross imbalance of political power and thus to government corruption, odious public debt, war, and preparations for further war. Although he warned us of what might befall the United States if it took the imperialist path, George seemed hopeful that the highest and best moral purpose of our nation would prevail. The paper concludes with an assessment of contemporary devices that protect the interests of the few over the many—subsidies, the ballooning national debt, the ever‐widening wealth gap, megacities, and the full‐spectrum‐dominance objective of U.S. imperialism.     

国有企业政治关联、政府审计质量和企业绩效——基于我国A股市场的实证研究

在我国,国有上市公司既拥有股权政治关联又拥有高管政治关联。相对于樊纲指数,更为微观的政府审计质量是影响政治关联对国有企业绩效作用发挥的重要因素。在不考虑政府审计质量的情况下,国有股权政治关联会降低企业的绩效,而高管政治关联会提升企业绩效;在考虑政府审计质量的情况下,政府审计质量越高,高管政治关联提升作用越不明显,也越会降低股权政治关联对企业绩效的损害作用。因此,提高政府审计质量可以改善国有企业的生存环境,优化资源的配置,促进企业的健康发展。     

Fiscal performance and elections in the context of a transition economy

It is widely accepted that, in democratic societies, incumbent governments may use various means, such as discretionary spending, to increase their chances of re-election. In the context of potential budget constraints (e.g., large debt), the incumbent might consider alternative means. Tax collection performance could be one such means that is prone to incumbents’ electoral manipulation, particularly in transition countries with a weak institutional framework. Investigating Albania, we show that fiscal performance, measured by monthly tax revenues, is poor before elections, especially in elections that result in political change. Before all elections, we observe a reduction in tax collection ranging from 3.2 percentage points in the twelve months before elections to 4.0 percentage points in the six months before elections. This implies a drop of more than half in fiscal performance compared with its long-term “natural” or average rate. Moreover, the deterioration in performance is considerably larger, by two- to threefold, before “change elections” (i.e. elections that result in a change of the governing party). After these elections, fiscal performance improves. The key to reducing deterioration in fiscal performance associated with elections is to establish rules and institutional oversight (independent or bipartisan) that reduce the discretion of tax authorities.     

Party alternation,divided government,and fiscal performance within US States

The literature on US state government fiscal performance has examined the role of institutional factors such as budget rules and divided government, but has largely ignored the impact of party alternation. This paper primarily focuses on whether party alternation in the governor’s office affects fiscal performance. Our hypothesis is that frequent party changes create a political environment that impacts fiscal performance. To further assess the impact of party alternation on fiscal performance, we consider our primary hypothesis in conjunction with the degree of division that exists between the governor’s office and the legislature. Using panel data from 37 states between 1971 and 2000 we test the hypothesis that frequent party alternation can be expected to affect fiscal performance and find strong support for the hypothesis. An earlier version of this paper was presented at the 2005 Public Choice Society Meetings. The authors would like to thank the conference participants, William Shughart, Charles Register, Jocelyn Evans, John D. Jackson, Amihai Glazer, and two anonymous referees for their comments. We would also like to thank Craig R. Stiller for his help in the collection of data. Any remaining errors remain the responsibility of the authors.     

The Dynamics of Embedded Rules: How Do Rule Networks Affect Knowledge Uptake of Rules in Healthcare?

Rules – in organizations and elsewhere – often become connected to other rules pertinent to similar or related action, and often they form rule networks that structure entire organizations and jurisdictions. Although rule networks are a common phenomenon, their effects on rule change have found little attention so far. How do rules change when they become embedded in rule networks? We build on prior conceptions of performance programs, organizational learning, and organizational knowledge to explore how rule network characteristics affect different types of knowledge uptake revisions of rules. Our analysis is quantitative and longitudinal and draws on archival data of clinical practice guidelines in a Canadian regional healthcare organization. Our findings indicate that the inbound networks of guidelines significantly affect their revisions. Our study suggests that rule networks shape the speed and direction of knowledge uptake of rules. Rules are dynamic, and their elaboration is path dependent and network dependent.     

Pursuing sustainable development through green entrepreneurship: An institutional perspective

Pursuing sustainable development through green entrepreneurship has been advocated, conceptualized, and empirically examined in the recent environmental management and entrepreneurship literature. However, green entrepreneurs are embedded in institutional environments that may discourage them from embracing sustainable development because of the “paradox of embedded agency.” How can a firm overcome the liability of such an agency issue and escape what has become known as a “green prison”? This study proposes that, because international venturing exposes firms to foreign institutions, it provides them with opportunities for institutional learning. Thus, we examine how international venturing influences green entrepreneurship which, in turn, impacts firm performance. Specifically, based on institutional theory, this study develops a firm-level green entrepreneurship framework with three dimensions: green initiatives (a firm's active adoption of green practices), received government green support (benefits that a firm gains from the government by adapting to governmental incentives, programs, and policies related to green practices), and green political influence (a firm's attempts to influence legislation that enacts laws, rules, and regulations related to green practices). The results obtained by analyzing 152 firms that engage in international venturing activities and 151 firms that do not show that international venturing is positively associated with green initiatives and government green support while these two factors further directly enhance firm performance and mediate the effects of international venturing on performance.     

Victim or Victimizer: Firm Responses to Government Corruption

What is the relationship between government corruption and firm performance? To address this question, I conduct a review of articles published in the leading management journals on government‐business interactions pertaining to rent‐seeking activities and integrate findings from the fields of international business, social issues in management, public organization, institutional change, and corporate political activity. I find that while much empirical work corroborates the earlier findings suggesting a corrosive impact of government corruption on firm performance in general, management research also points to the heterogeneous impact of government corruption on individual firm performance, driven by the strategic activities conducted by firms in response to corruption. I propose an integrative model of firm strategy vis‐à‐vis corruption that predicts the activity choice of the firm as predicated by its organizational structure, political resources, industry regulation, and surrounding political and social institutions.     

Auditor Industry Specialization,Political Economy and Earnings Quality: Some Cross‐Country Evidence

Using cross‐country data, we evaluate the impact of investor protection on the association between earnings quality and audits by industry specialists. Our findings show that the positive association between industry specialist auditors and earnings quality as documented in the literature is affected by the political electoral system, which reflects investor protection rights in a country. We document that audits by industry specialists are associated with higher earnings quality in countries with the proportional electoral system, reflecting weak investor protection. Our results also confirm Kwon et al.'s findings that overall there is a positive association between earnings quality and audits by industry specialists in countries with weak legal enforcement. Our findings, however, indicate that Kwon et al.'s results are valid only for countries with weak investor protection reflected by the proportional electoral system and not for countries with strong investor protection reflected by the majoritarian electoral system. These findings thus suggest that higher earnings quality of firms audited by industry specialists across countries can especially be expected when investor protection is low and legal enforcement is also weak. In addition, our research suggests that future cross‐country studies could explicitly consider the role of the political electoral system of a country in evaluating corporate governance, management and accounting issues.