Coups,regime transitions,and institutional consequences

Coups and regime transitions are events that typically are intended to change the basic institutional framework of a country. Which specific institutions change and the consequences of these changes nevertheless remains largely unknown. Change after a coup or transition implies that some form of political or judiciary barrier has been erected or removed. We therefore focus on what happens to the quality of judicial institutions and political corruption around coup attempts and other types of regime transitions. We hypothesize that when coups are conducted by members of the incumbent political elite, they are likely to remove barriers to change while coup makers outside of the ruling elite are more likely to do the opposite and thus protect themselves from what remains of the elite in the political system. Using the new Bjørnskov-Rode coup dataset, our results suggest that successful coups are associated with degradation of institutions, with successful military coups in particular having a significant negative effect. Results are more varied for civilian coups where we find indications of differences depending on whether the coup makers are part of a political elite or not. We also explore whether the incumbent regime influences the effect of coup attempts on institutional change.     

Differences matter: The effect of coup types on physical integrity rights

What is the effect of coups d’état on repression? Do ‘bad’ coups against democracies decrease respect for physical integrity rights? Does it make a difference whether a coup d’état is staged by the military or a civilian leader? We argue that the impact of coups on repression varies with regime type as this determines the relative costs of repression and buying political support. Combining updated panel datasets on democracy and coups d’état from 1960 to 2010, we provide an analysis of the effects of coups on physical integrity rights, differentiating post-coup regime type. We find that post-coup respect for physical integrity rights decreases when non-democratic regimes depose democratic regimes through a coup d’état - an effect which is fading over time. As opposed to military autocracies, civilian-led regimes are more repressive in the year after successfully ousting the previous government. Together with supplementary findings on democracy-inducing and failed coups, our findings show that differences in regime types do matter in research of coups d’état.     

Citizens, Autocrats, and Plotters: A Model and New Evidence on Coups D'État

We present a model of coups in autocracies. Assuming that policy choices cannot be observed but are correlated with the short-run performance of the economy we find that: (a) the threat of a coup disciplines autocrats; (b) coups are more likely in recessions; (c) increasing per capita income has an ambiguous effect on the probability of a coup. The implications of the model are consistent with the evidence. On average, one recession in the previous year increases the probability of a coup attempt by 47 percent. By contrast, the effect of the level of per capita income is weak.     

Mass protests,security-elite defection,and revolution

Political regimes will survive even intense mass protests as long as the security elite abstains from defecting. However, empirical and theoretical work has shown that coups, as the active form of security-elite defection, become more likely under mass protests. Still, many regimes collapsed under mass protests without a coup ever happening. In these no-coup situations, we demonstrate, using case studies, that the security elite did in fact abandon loyalty to the regime, albeit in a passive fashion. We develop a model that explains why mass protests can induce the security-elite members to coordinate on passive security-elite defection, thus paving the way for a full-fledged revolution. With our model, we work out the parameters under which passive security-elite defection is likely. Finally, by systematically relating our model to our cases, we demonstrate how mass protests triggered security-elite defection in a number of particular historical cases of revolution.     

Endogenous (in)formal institutions

The paper provides a formal framework identifying both the origins and interaction of a culture of cooperation and inclusive political institutions. When elite members and citizens try to cooperate in sharing consumption risk and joint investment, the elite enacts democracy to convince the citizens that a sufficient part of the investment return will be shared via public spending and thus, they should cooperate. In addition, cultural accumulation rises with the severity of consumption risk at its moderate values and then drops at its high values making cheating too appealing. Finally, the citizens may over-accumulate culture to credibly commit to cooperating in investment at its intermediate values threatening democracy. These predictions are consistent with novel data on 90 European historical regions spanning the 1000–1600 period. Reforms towards tighter constraints on the elite’s power were driven by the potential for Mediterranean trades. Moreover, the activity of both the Cistercians and the Franciscans, our proxy for the citizens’ culture, has an inverted U-shaped link with the temperature volatility. Finally, the shift of long-distance trades towards the Atlantic fostered the Franciscans’ spread in the Mediterranean, where they organized micro-credit activities reinforcing the citizenry-elite partnerships.     

On the timing of political regime changes in resource-dependent economies

We consider a resource-dependent economy initially ruled by the elite. The transition from the autocratic to a more democratic regime takes place only if the citizens decide to revolt against the elite. The occurrence of a revolution primarily depends on the autocratic regime vulnerability and the level of inequalities, both being driven by the elite׳s redistribution and repression policies. First, we show that when a political transition is inevitable, the elite choose the maximum rate of redistribution to lengthen their period in office. Second, we find that the duration of the autocratic regime is linked to resource abundance, and how it relates to the elite׳s policies. More resources lead to a shorter reign of a redistributive regime, which may not be the case of a repressive regime. Finally, we interpret the Arab spring sequence in light of our findings.     

Rewards from public office and the selection of politicians by parties

We investigate the relationship between the quality of politicians, defined in terms of their competence (skills), and rewards from public office in a game between parties and citizens in which parties play a crucial role in the selection of politicians. Parties shape the selection of politicians by manipulating information about the quality of their candidates. An increase in the rewards from public offices leads to two opposing effects on the average quality of politicians. The first is a selection effect, whereby more skilled citizens enter politics, leading to an increase in average quality. The second is a manipulation effect, as parties have the incentive to further manipulate information to increase the probability of election for their unskilled candidates, from whom they can extract higher rents in the form of service duties. We find that the second effect dominates when (i) parties’ costs of manipulating information are sufficiently low; (ii) even in the absence of manipulation, the quality of information available to citizens about candidates is sufficiently poor; and (iii) the net gains from becoming a politician for unskilled citizens are sufficiently larger than those for skilled citizens. These findings provide a rationale for the ambiguous sign of the empirical relationship between the quality and pay of politicians.     

Coups d’état and the cost of debt

This paper extends the literature on the economic consequences of coups d’état by examining their impact on the cost of debt for sovereigns and, respectively, the likelihood of experiencing a sovereign default. Using a monthly panel dataset covering 134 countries over the period 1990 to 2014 and after employing the entropy balancing methodology, I find that the occurrence of coups d’état significantly increases the cost of debt for sovereigns and their likelihood of experiencing sovereign defaults. I demonstrate that this finding is extremely robust to different specifications, potential omitted variables, and the use of falsification tests. Moreover, I show that the impact of coups d’état on the cost of debt varies systematically depending on the political regime, the types of coups d’état, and the sovereign credit rating grade. Finally, I provide suggestive evidence that the induced drop in the real economic growth, the changes in the willingness function to honor contracts and irrational exuberance are the root of increased sovereign debt cost and the likelihood of defaults following coups d’état.     

Political regimes and foreign intervention

We present a theory of endogenous political regimes that emphasizes foreign direct investment as a motive for foreign governments to either induce regime transitions or promote regime consolidations. We characterize different forms of foreign intervention and identify the conditions under which they occur. We highlight new channels through which economic factors affect political regime choices. Foreign intervention is most likely to originate from countries where the government has a substantial pro-investor bias and to be directed at destinations where FDI is highly profitable and where income inequality is high. Foreign-sponsored coups d'état are more likely to be directed at democratic governments of poor countries. In destinations where FDI is highly profitable but the domestic elite is weak, foreign intervention tends to be aimed at stabilizing dictatorships. We relate the analysis to evidence on foreign intervention from around the world.     

Overstrained citizens? The number of ballot propositions and the quality of the decision process in direct democracy

We study how the number of ballot propositions affects the quality of decision making in direct democracy, as reflected in citizens’ knowledge, voting behavior, and attitudes toward democracy. Using three comprehensive data sets from Switzerland with over 3,500 propositions, we exploit variation in the number of federal and cantonal propositions. Voters know the most about the content of federal propositions when they are exclusively presented and less with a high number of concurrent cantonal propositions on the ballot. Across other outcomes we find no consistent indications that – for the observed variation in the exposure to popular votes – a high number of propositions impedes the quality of decision making in Swiss federal direct democracy. In the medium to longer term, more federal propositions on the ballot rather relate to higher perceived political influence and satisfaction with democracy.     

The effects of bureaucracy on political accountability and electoral selection

This paper examines how bureaucracy affects political accountability and electoral selection, using a three-tier political agency model consisting of voters, politicians and bureaucrats. In the model’s hierarchy, politicians are constrained by elections while bureaucrats are controlled by budgets. If voters and bureaucrats prefer different types of politicians (i.e. they have a conflict of interests), incumbents pass oversized budgets to prevent bureaucrats from engaging in strategic behaviours that damage incumbents’ reputations. If, instead, voters and bureaucrats prefer the same type of politicians (i.e. they have an alignment of interests), bureaucrats cannot obtain a concession from politicians. In the latter case, however, bureaucrats send voters a credible signal regarding an incumbent’s type, which improves electoral selection. This paper also shows that political appointment systems improve political accountability in the conflict-of-interests case while they weaken electoral selection in the alignment-of-interests case.     

Law, state power, and taxation in Islamic history

The ruler's power varied greatly in Islamic history over time and space. We explain these variations through a political economy approach to public finance, identifying factors affecting economic power and its constraints. An influential interest group capable of affecting the ruler's power was the legal community (‘ulamā’). This community could increase the ruler's ability to extract a surplus from the citizenry by conferring legitimacy, thereby lowering the cost of collecting taxes. It could also limit power through legal constraints on taxation. We show how changes in legitimacy and legal constraints affected the economic power of rulers in representative episodes of Islamic history and identify general trends and dynamic processes underlying the relationship between the state and the legal community.     

Social transfers and conditionalities under different regime types

This paper examines the implications of political factors for social policy choices. Specifically, we explore the link between regime type and adoption of unconditional transfers versus transfers conditioned on beneficiaries’ investments in human capital. Due to the direct nature of benefits, unconditional transfers are more likely to be used to buy off opposition and prevent social unrest. As transfers that are conditioned on education and health pay off only in a relatively distant future, they are rarely initiated for political motives and rather defined by interests of long-term development and human capital accumulation. Using the new dataset on Non-Contributory Social Transfer Programs (NSTP) in developing countries, we find that transfers are indeed chosen so as to be unconditional under less democratic regimes. There is some evidence that conditional transfers are more likely to be adopted in democracies. In particular, democracies tend to increase the number of conditional schemes once any social transfer program is introduced.     

Evolution of Risk and Political Regimes

The risk of political predation impedes the achievement of economic prosperity. In this study, we analyze how the risk of predation evolves in different political regimes. Formally, we look at the interaction between a government and citizens in which, in each period, the government has an option to predate. Citizens prefer governments that are competent and non‐predatory and strive to replace ones that are not. Regimes differ in the degree to which citizens can succeed in doing so. In pure democracies, citizens can displace incumbent governments; in pure autocracies, they cannot; and in intermediate cases, they can do so in probability. After economic downturns, the posterior probability that the government is competent and benevolent declines. According to the model, in intermediate regimes, but not in others, governments can separate by type. One implication, then, is that these regimes are politically and economically more volatile, with higher levels of variation in assessments of political risk and in economic performance. Another is that in such regimes, political leadership can make an economic difference. Empirically, we test our argument by measuring the impact of economic downturns on the perceived risk of political expropriation in different regime types, using as instruments the incidence of natural disasters and unexpected terms of trade shocks.     

Wy are the transition paths in China and Eastern Europe different?

The purpose of this paper is to provide a framework linking communist regime collapse and privatizing economic reforms. The framework permits us to explain why certain communist regimes lost their monopoly of political power while others have not. We show that the essential difference between those communist regimes which survived economic reform and those which did not, lies in the nature of the privatization reform introduced by the communist leadership. The privatization that we call ‘Market‐Leninist’, was implemented in China and Vietnam while the second type of privatization, termed ‘Embezzlement for a rainy day’ was the type of privatization implemented in Eastern Europe. We show, in the context of a game between rulers and the population, that the size of the repressive apparatus is the key element determining the type of privatization chosen by the rulers. JEL classification: P2, P3.     

政治参与视角下立法听证会的困境与机遇

自从听证会被引入立法领域以来,这项在国外良好运转的制度,在我国却出现了水土不服的情况,结果并不理想。有关组织者对立法听证会的效果和功能表示失望,许多人反映,立法听证会"成本大、过程长、效果差"。为什么会有这种结果?是否立法听证与我国的政治制度具有本质冲突?文章主要从公民政治参与的角度,以各省市区有关立法听证的制度文本和实践统计为基础,在对各省的文本差异和实践结果进行分析的基础上,探讨了立法听证会的困境、机遇和出路。     

Back to the BOG, Austrian-style

Robust political economy begins with assumptions of self-interested planners who lack perfect information. In such a world, the social planner does not necessarily outperform the decentralized outcome. Crampton and Farrant (2005) argue that the inability to engage in economic calculation reduces the ability of social planner to extract consumer surplus. Thus, the lack of calculation improves the welfare of the median citizen which contrasts with conventional wisdom. We argue that they overstate their results. First, the calculation argument fails because of its underdevelopment, not because of the empirical record. Second, the welfare implications cannot be adequately addressed by assuming diminishing marginal utility of income or using the median welfare standard. Third, robust political economy has not developed a model that yields meaningful welfare comparisons. Thus, robust political economy remains in its early stages. JEL Code P0, P16, P50 With apologies to Gordon Tullock     

The golden hello and political transitions

We analyze the influence of IMF and World Bank programs on political regime transitions. We develop an extended version of Acemoglu and Robinson’s [American Economic Review 91, 2001] model of political transitions to show how the anticipation of new loans from international financial institutions can trigger political transitions which would not otherwise have taken place. We test this unexplored implication of the theory empirically. We find that the anticipation of receiving new loan programs immediately after a political regime transition increases the probability of a transition from autocracy to democracy and reduces the probability of democratic survival.     

‘Adaptive accumulation’ and US political economy

According to popular and academic understandings of political economy, the United States is characterised by the most open forms of free market production. From Marxist to institutionalist to liberal analyses, the US is said to exhibits a governance model in which state structures are minimally intrusive to capitalist civil society. There is a need for political economy that re-positions the US state as more than just a willing facilitator, lender-of-last-resort or minimal regulator of capitalist dynamics. This paper argues that ‘adaptive accumulation’ has normalised in the US context, wherein capital actively allies itself with public state objectives (and mechanisms) to seek new or enhanced profit streams, by transforming or rerouting public revenues, such that they afford private accumulation. The robust entry of capital in areas such as health, education and incarceration are highly notable, inasmuch as they harness public objectives for private but not-so-competitive ends. By shedding light on such domains, the paper contributes to our understanding of capital and its ongoing efforts to stay ahead of investment crises by actively shaping its operative environment – in this case, maintaining both the credibility and regularity of publicly inspired (and often financed) revenue streams while, ultimately, transforming their utilisation and purpose.     

POLITICAL AND ECONOMIC FREEDOM, FISCAL POLICY, AND GROWTH NEXUS: SOME EMPIRICAL RESULTS FOR FIJI

This article presents an empirical analysis of the relationship between political and civil liberty, economic freedom, and growth for Fiji. Fiji's experience of two military coups in 1987, the delay to resolve the agricultural land lease issues, and the implementation of the 1990 Constitution have been major setbacks in terms of Fiji's nondemocratic political environment and uncertain economic policies, a decline in the private investment and exports, and an exodus of skilled labor. This experience severely damaged the growth prospects whereby unstable sociopolitical institutions undermined the importance of economic freedom and civil liberties of its citizens and foreign investors. Empirical results presented here support the view that democratic values and economic freedom are significant for growth. A statistical test for the endogeneity of democracy variable rejects the null, thus the reverse causality, so democratic environment and economic freedom lead to higher economic growth.