The role of constitutions on poverty: A cross-national investigation

We construct and use a new historical data set on economics and social rights from the constitutions of 195 countries and an instrument variable strategy to answer two important questions. First, do economic and social rights provisions in constitutions reduce poverty, measured as headcount income and health outcomes? Second, does the strength of constitutional language of the economic and social rights matter? Constitutional provisions can be framed either more weakly as directive principles or more strongly as enforceable law. Our results suggest three findings. First, we do not find an association between constitutional rights generally framed and poverty. Second, we do not find an association between economic and social rights framed as directive principles and poverty. Third, we do find a strong negative association between economic and social rights framed as enforceable law and poverty when we use legal origins as our IV. These results persist for indices of constitutional rights and also when we restrict the sample to non-OECD countries. The policy implication is that constitutional provisions framed as enforceable law provide effective meta-rules with incentives for policymakers to initiate, fund, monitor and enforce poverty reduction policies.     

Do constitutions cause large governments? Quasi-experimental evidence

How do constitutional rules for elections and legislation affect the size of government? We ask this question in a new sample of about 80 countries in the 1990s. In addition to conventional regression methods, we use quasi-experimental, matching methods, which more convincingly address legitimate criticisms of causal inference from cross-country data. Both sets of estimates suggest that presidential regimes and majoritarian elections produce smaller governments.     

The economic effects of constitutions: do budget institutions make forms of government more alike?

According to an influential theoretical argument, presidential systems tend to present smaller governments relative to parliamentary countries because the separation between those who decide the size of the fiscal purse and those who allocate it creates incentives for lower public expenditures. In practice, however, presidential and parliamentary countries come in many forms. In particular, variation in procedural rules that assign budget prerogatives across the popular branches of government may affect the underlying incentives that differentiate these types of regimes in terms of fiscal outcomes. More specifically, we argue that more hierarchical rules that concentrate budgetary power in the executive relative to the legislature do not only reduce the extent of the common pool problem but also limit the degree of separation of powers, which may have a countervailing effect. Consequently, the effect of the form of government on public expenditures is conditional on specific procedural rules. We test this hypothesis on a broad cross-section of countries and find that presidentialism has a negative impact on government size only when executive discretion in the budget process is low (that is, in a context of separation of powers). However, the negative effect of presidentialism on expenditures vanishes when the executive’s discretion over the budget process is higher. This result, in addition to highlighting that not all budget institutions have the same effect on incentives and outcomes, points out how important it is to go beyond broad characterizations of political institutions for explaining policy outcomes, and more generally, for moving forward the research agenda in constitutional political economy.     

Is Foreign Direct Investment “Gender Blind”? Women's Rights as a Determinant of US FDI

The impact of women's rights on a country's competitiveness in the global economy is a source of contention. While educational opportunities for women, as well as political empowerment, are linked to a variety of positive outcomes, the impact of economic rights is mixed. Toward better understanding these issues, we focus on the role of women's rights in attracting foreign direct investment (FDI). Though foreign capital plays a key role in the development strategies of many countries, and many of the growth areas in FDI rely heavily on women's labor, extant literature on the determinants of FDI largely ignores gender. To gain insight into these issues, we examine the impact of women's political, economic, and educational rights across four different types of US FDI into the developing world. We find a mixed relationship between women's rights and FDI that varies across industrial sectors.     

MARKET MAKING AS STATE MAKING: Constitutions and Economic Development in Post-communist Eastern Europe

After nearly a decade of struggle to liberate economic activity from the state, many of the post-communist countries now face the question of how to liberate the state captured by economic groups. This paper argues that the creation of a market order is about the parallel constitution of a specific structure of rights and of a state with a specific structure of representation allowing for the capacity to uphold these rights and prevent the capturing of the state by particularistic interests. The constitutional sources of such state capacities have to do with a specific representation of social diversity within the state based on the principles of distributed authority and distributed intelligence. Based on the analysis of two periods of state (re)making in the United States, described as key conjunctures in market making, the paper offers a framework to understand the constitutional sources of diversity in post-communist market making.     

Constitutionalism and credibility in reforming economies1

There has been relatively little investigation of the effect of constitutional transformations on the economic transition in post‐communist countries. We develop a simple signalling model in which constitutionalism – a commitment to limit political power and provide judicial defence of basic rights – reinforces the credibility of pro‐market candidates’ electoral promises and boosts public support for economic reforms. These findings are tested using opinion poll data on public support for reform in Central and Eastern Europe, and in the former Soviet Union, in the 1990s. In a two‐stage procedure we show that public support for market reforms is higher in countries where incumbents have taken deliberate steps to increase political accountability and judicial independence. Public support also spurs actual economic reform.     

Trigger warning: the causal impact of gun ownership on suicide

With a growing debate over tighter firearm regulations, we consider an important social consequence of increased firearm access: increased firearm suicides. Using data from the federal criminal background check system, we consider the impact of firearm ownership on firearm suicide rates. To deal with concerns of identification, we instrument for firearm background checks with state-year-level Google search intensity for phrases that reflect fear of future gun shortages and learning about the constitutional rights of firearm owners. We find that an increase in firearm ownership has a sizable and statistically significant impact on firearm suicide rates. A 10% increase in firearm ownership increases firearm suicide rates by approximately 3%, which is five times larger than non-instrumented estimates. Furthermore, we find no effect of gun ownership on non-firearm suicide rates, suggesting our findings are not simply capturing a suicide method substitution effect. The results are consistent with a variety of validity and robustness tests. Our results make clear the link between firearm ownership and firearm suicide rates, which have increased dramatically over the last decade.     

政府规模、法治水平与服务业发展

本文利用跨国横截面数据,计量检验了政府规模、法治水平与一国服务业比重之间的关系。我们发现,以一国法治水平来衡量的契约维护制度的质量,与其服务业比重显著正相关;政府规模与其服务业比重显著负相关;其中法治水平对服务业比重的影响在中低收入国家更重要。进一步检验表明,统计上无法发现私人财产保护制度对服务业比重的显著影响,而政府支出规模和政府投资规模对服务业比重都有负向的影响。     

Imported carbon emissions: Evidence from French manufacturing companies

This paper analyzes imported carbon emission at the firm level. To do so, we combine information on emissions, imports, imported emissions and energy prices for French manufacturing firms between 1997 and 2014. We document a significant increase of the carbon emissions embedded in imports of French manufacturing companies over the period 1997 to 2014 that is attributable mainly to a shift towards more carbon-intensive products and countries. We then estimate the impact of imported emissions on domestic emissions and emission intensity using a shift-share instrumental variable strategy based on third countries supply shocks. We do not find compelling evidence of an impact of carbon imports on total emissions, but emission efficiency improves significantly in companies offshoring emissions abroad. A 10% increase in carbon offshoring causes a 4% decline in emission intensity. In addition, we find that the elasticity of domestic emission intensity to imported emissions is stronger in energy-intensive sectors, on high-productivity companies and among exporters. Reassuringly, the relationship between imported emissions and emission intensity does not seem to be driven by a pollution haven motive.     

Are semi-presidential constitutions bad for democratic performance?

Many countries since 1990 have adopted semi-presidential constitutions, which are often considered to be problematic, primarily because of the potential for conflict between the assembly-supported government and the popularly elected president. Such conflicts are said to lead to unstable governments, policy paralysis and the eventual undermining of the democratic regime. Using data for all parliamentary and semi-presidential democracies between 1946 and 2006, we examine the effect of semi-presidential constitutions on the duration of prime ministers’ tenure in office, government accountability with respect to economic outcomes, and democratic survival. We also examine (for a smaller sample of post-communist countries) the impact of these constitutions on the progress of structural reforms. We find that the observed higher instability of prime ministers in semi-presidential democracies is more due to the electoral system than to the presence of a popularly elected president. We also find that semi-presidential constitutions have little impact on the government’s accountability to economic outcomes and on the survival of democratic regimes. Finally, we find that neither a weak president nor a weak government is optimal for the progress of economic reforms in post-communist countries. Regarding economic reforms, the optimal allocation of constitutional powers between the president and the government grants both significant powers.     

European influence and economic development

The development accounting literature identifies political institutions as fundamental development determinants. Forms of government or executive constraints are thought to shape economic institutions (e.g., property rights) that provide necessary incentives for economic growth. One strand of the literature suggests that European influence is a crucial economic development determinant, presumably through the adoption of European institutions. But how exactly did European influence in the distant past induce positive economic outcomes today? Previous approaches rely on “language,” “settler mortality,” “legal origins” or the “number of European settlers” as indirect proxies of European influence. We propose a direct and quantifiable mechanism: the adoption of European constitutional features. We construct a dataset of all constitutional dimensions from 1800–2008 for all countries and find that nations experience growth accelerations after adopting features of European constitutions. The growth effects are influenced (negatively) by periods of political turmoil, but they are independent of colonial backgrounds. These results show how European influence may have fostered growth, and they imply that countries were able to overcome adverse initial conditions over the last 200 years by adopting European constitutional features. Our constitutional dataset is sufficiently detailed to identify the specific dimensions of European constitutions that matter most for development: legislative rules and specific provisions that curtail executive powers.     

“Constitutionalizing” the corporation

To become effective instruments in the attainment of a sustainable society, corporations should have their constitutional status settled. Thus far, mainly by Supreme Court decisions, corporations have an uncertain status. They are “persons” under the Constitution and have certain rights; but unlike natural persons, they do not have concomitant constitutional duties. Corporations should be viewed as “private” governments exercising substantial power in society. They are, however, considered to be associations of individuals rather than divisions of society. The need is to legitimate their governing power by “constitutionalizing” them. That can be done by corporations accepting, or having imposed upon them, two principal constitutional duties. First, means should be developed whereby corporate officers routinely take the general good into account. That duty could be implemented by making “social impact statements,” analogous to but broader than the familiar environmental impact statements, before making important corporate decisions. Secondly, as “sociological communities,” corporate officers wield considerable power over members of those communities. A bill of rights similar to the Constitution's Bill of Rights is recommended so as to make corporate power that is necessary for achievement of societal goals as tolerable and decent as possible. Acceptance of those duties would make corporations parts of, not separate from, the greater corporation called society. They would be private, profit-making entities with a definite public function. Preferably, the duties should be voluntarily accepted. Congress, however, has undoubted constitutional power to impose both, should it so desire.     

What constitutes a constitutional amendment culture?

Why are some constitutions amended frequently and others hardly at all? An obvious candidate determinant is constitutional rigidity, i.e., the size and number of procedural barriers to amendment. Given some demand for amendment, greater rigidity implies a smaller supply. However, measures of rigidity often do not correlate significantly (or even with the predicted sign) with amendment rates. Ginsburg and Melton (2015) argue that amendment culture – “shared attitudes about the desirability of amendment” – is a more important determinant of amendment rates. We study up to 128 constitutional episodes from 54 countries and estimate relationships between amendment rates and Hofstede cultural indices. Cultures that are more individualistic and less prone to uncertainty avoidance are associated with higher amendment rates. When cultural dimensions are controlled for, the lagged amendment rate (Ginsburg and Melton’s proxy for culture) is not a robust correlate.     

Post-socialist constitutions: The de jure–de facto gap,its effects and determinantsa

The aim of this paper is to contribute to the debate on constitutional rules and their economic effects by extending focus to the de jure–de facto constitutional gap. First, evidence is provided that size of this gap matters as higher gaps lower the effectiveness of the constitutional commitment mechanism. Second, several explanations of this gap are identified, in particular relating to the democratization process, political conflict, age and comprehensiveness of the constitution. The conclusions are based on an empirical study for the unique setting of the post-socialist countries of Europe and Asia, which all enacted new constitutional frameworks after 1989 and it is shown that in some of these countries constitutions acted as blueprints.     

Constitutional Contractarianism

In this paper, I argue that we should restrict fundamentalcontractarian agreements to decision procedures for adjudicatingdisputes over particular assignments of rights. I attempt toshow that neither substantive principles prescribing specificassignments of rights nor specific rights assignments themselvescan be established at the level of the constitutional agreementsby which we move from force to legal procedures to settle ourdisputes. Instead of substantive principles, I make a case forimpartial non coercive procedural principles that promise toeach party to a dispute a more or less equal chance of a favorabledecision. Whenever it is in our mutual interest to save the costof settling disputes by coercion, it is in our mutual interestto adopt impartial procedures to settle these disputes.In this paper, I shall argue that we must justify particularproperty rights in terms of an impartial constitutional contract.I adopt the concept of a constitutional contract from James Buchananand take his perspective as the starting point of my account.For Buchanan a constitutional contract is the basic agreementthat first introduces rights and makes possible both a marketand a collective provision of public goods. For him, the constitutionalcontract is agreed to from an initial position of predation anddefense in which there are no prior constraints on the appealto force and threat-advantage. However, on his view, the costof using coercion to settle disputes normally makes it in ourrational interest to accept a constitutional contract that replacescoercion with non coercive procedures to settle disputes.My paper will have three parts. In the first, I shall argue thatBuchanan is right to suppose a starting point of predation anddefense to establish a rational basis for legal and moral constraintson the use of coercion to settle property rights. However, Ishall make the case that he is mistaken to attempt to establishparticular property rights from that perspective. The constitutionalcontract must be limited to impartial decisionmaking procedures.In the second part, I shall contrast Buchanan's contractarianismwith that of John Rawls and David Gauthier. I shall show thatboth Rawls and Gauthier fail to recognize, as Buchanan does,that we cannot defensibly raise substantive distributive principlesto fundamental constitutional principles. In the third part ofmy paper, I shall build upon the conceptions of impartialityfound in Buchanan, Rawls, and Gauthier in an attempt to formulatethe main requirements of an impartial constitutional procedurefor the non coercive adjudication of disputes regarding rights.My thesis is that a rational consensual resolution of conflictis possible only by deciding property rights by means of impartialconstitutional procedures.     

Product Lifetime: A Determinant of Entry Decision by Multinational Firms

Existing literature on the role of intellectual property rights (IPR) protection has painted an ambiguous picture about the size of the effects of stronger IPR on the choice of the multinational firm’s mode of entry into foreign market. Some empirical studies suggest that improving IPR in recipient countries will have higher effect on licensing, while others found larger effect on foreign direct investment (FDI). The available indices of protection only measure country-wide characteristics and do not pick inter-industry variation, while the data show significant differences in losses of US multinationals by industry. In this paper, we introduce and empirically estimate a new dimension to multinational firm’s decision to enter a foreign market—a parameter that reflects the length of positive profits that the firm can earn in various industries. We dub the estimated parameter a perceived time of rent extraction. The introduction of the time parameter allows us to differentiate the effects of stronger IPR on the entry modes in different industries and reconcile the ambiguity results in the literature. Particularly, strengthening IPR has higher impact on FDI in industries with shorter rent extraction time, while licensing is affected more than FDI in industries with longer rent extraction time.     

Time zones,GDP & exports

Recent studies have established a negative effect of time zone differences on trade flows. We extend this literature by examining whether a country’s economic size is relevant in its’ response to an increase in time zone differences. We argue that the negative impact of time zone differences should be more important for low-income countries as these countries often face higher trade costs and have firms with lower productivity compared to its high-income counterparts. To examine this heterogeneous impact, we interact the time zone measure with various quartiles of GDP. We find that these low-income countries face a much higher negative impact of time zone differences on exports compared to high-income countries. Our results help explain why the small countries of Samoa and Tokelau changed time zones to closely align with their main trading partners, while high-income countries have not taken such steps.     

Dividend policy: Shareholder rights and creditor rights under the impact of the global financial crisis

The extant literature shows that shareholder and creditor rights positively affect corporate payout policy in a static macroeconomic environment. This study examines how the effects of shareholder and creditor rights on dividend policy change under the impact of the global financial crisis. We posit that this exogenous shock increases agency costs of both shareholders and creditors. With a sample of 133,631 firm-year observations from 23,890 firms incorporated in 41 countries, we find that both shareholder and creditor rights are less effective in dividend decisions in the post-crisis period and the extent of shareholder (creditor) expropriation in the post-crisis period is larger when creditors (shareholders) are adequately protected.     

The Coevolution of Finance and Property Rights: Evidence from Transition Economies

The transition from communism to capitalism was necessarily accompanied by a sudden and abrupt increase in the financialization of society. This increase occurred in an environment that, even now, still has little experience with or expertise in financialization. Given that financialization occurred simultaneously with the growth and evolution of other political and economic institutions, the question arises: What was the effect on these other nascent institutions like property rights? This article empirically analyzes the relationship between financialization and property rights in transition countries. Using a unique monthly database of twenty transition countries over a period from 1989 to 2012, this article finds that the influence of financialization depends on which definition of “financialization” is used. In particular, increases in basic financial intermediation improved property rights. However, higher-order “financialization,” proxied here by the size of capital markets and the wages in the financial sector, appeared to have a negative impact on the development of broad-based property rights in transition.     

Property rights revisited

Over the last 20 years, a large number of papers have tried to quantify the effect of property rights on a wide range of variables like growth, trade and to a lesser extent, inequality. However, these studies have been inherently limited by measures of the security of property rights that are currently available. These suffer from any of a number of shortcomings, ranging from a lack of availability, objectivity, or the fact that they measure a broader concept like the rule of law. This paper tries to address this gap by proposing a new index of property rights. Specifically, we use a state-space model to combine all available indicators tracking the security of property rights into an index that covers 191 countries over the period 1994–2014. We compare it to the existing indicators by revisiting the link between inequality, democracy and property rights, using a panel threshold regression model with fixed-effects. Depending on the measure of property rights that is used, there can be considerable differences in the size, significance and even the sign of the estimated parameters. Specifically, in contrast with existing measures, we find that a strengthening of the security of property rights reduces inequality in highly democratic countries only via the government's redistribution channel.