Impatience,reputation and offending

Reconviction rates for offenders are high despite sentence severity increasing with the number of convictions. The standard one-shot model of crime provides little scope for exploring ‘persistence effects’, although recent papers by Emons and others have sought to put offending decisions into a more dynamic setting. This article develops a simple two-period model of offending in which criminal convictions act as an adverse signal in labour markets. Ordinary and multinomial logistic regression modelling is used to test the predictions of the theoritical model and explore the link between unemployment and convictions. The empirical results, which are based on longitudinal data from the National Child Development Study (NCDS) in the UK, strongly support the view that, ceteris paribus, individuals with previous convictions are at higher risk of being unemployed.     

Casinos and political corruption in the United States: a Granger causality analysis

The commercial casino industry experienced an unprecedented expansion in the United States during the 1990s. As the industry has grown, so has the anecdotal evidence that links the casino industry with political corruption. However, there have been no empirical analyses of the issue. We use state-level panel data from 1985–2000 to posit a Granger causality analysis of the relationship between corruption convictions of state public officials and the predicted adoptions of casinos at the state level. We find evidence that predicted casino adoptions Granger cause corruption convictions. This finding is suggestive of a scenario of regulatory capture and may help explain why state-level gaming regulatory agencies have a history of softening gaming regulations after the initial introduction of casinos. Our study provides the first empirical evidence linking casinos to political corruption.     

ECONOMIC POLICY UNCERTAINTY EFFECTS ON CREDIT AND STABILITY OF FINANCIAL INSTITUTIONS

We examine policy‐related economic uncertainty effects on the availability of credit, non‐performing loans and loan loss provisions using a panel of 18 countries. We provide significant evidence that uncertainty reduces the availability of credit while leading to increases in banks' non‐performing loans and loan loss provisions, distorting sectoral stability. Our findings are economically meaningful.     

Commodity taxes under uncertainty

This paper considers the relative distorting effect on output of commodity taxes, specific and ad valorem, in a situation where a firm faces revenue uncertainty. It is shown generally that this effect depends both on the precise nature of the firm's revenue uncertainty and on the degree of its risk aversion. More specifically, the distorting effect of each tax is characterised for a selection of objective functions and uncertain environments. These characterisations are compared in order to show the influence of alternative specifications on the relative distorting effect.     

IS THE EXCLUSIONARY RULE WORTHWHILE?

In the U.S. criminal courts must throw out improperly obtained evidence. A key justification for this practice is that it is that it deters law-enforcement misconduct. This paper uses principal-agent theory to suggest that, contrary to economic and other conventional wisdom, if the exclusionary rule is flawed it is because it deters inadequately rather than excessively. Principles of an optimal compensation scheme for law-enforcement personnel are offered along with evidence suggesting that actual compensation does not reflect them. The rule may thus fail to sufficiently prevent misconduct even as it increases the costs from lost convictions. (JEL K14, K42, D82)     

Who drives climate-relevant policies in the rising powers?

The future of human life on our planet is influenced increasingly by what goes on in the rising powers. This paper provides a political economy analysis of the climate-relevant policies of China, India, Brazil and South Africa. It shows that alliances play a key role in driving such policies. However, most actors who support such policies have priorities other than climate change mitigation. Their support for such policies comes from concerns with securing energy, building competitive green industries, creating jobs or providing a basis for future public revenue. This insight is not just of analytical but also of political importance. It means that climate-relevant policies can draw on support from a wide constituency – not just those with green convictions. Such analysis provides the stepping-stone for understanding the political feasibility of low-carbon transformations.     

Corruption in America

We use a data set of federal corruption convictions in the U.S. to investigate the causes and consequences of corruption. More educated states, and to a smaller degree richer states, have less corruption. This relationship holds even when we use historical factors like Congregationalism in 1890 as an instrument for the level of schooling today. The level of corruption is also correlated with the level of income inequality and racial fractionalization, and uncorrelated with the size of government. There is a weak negative relationship between corruption and economic development in a state. These results echo the cross-country findings, and support the view that the correlation between development and good political outcomes occurs because education improves political institutions.     

Political contributions and corruption in the United States

The empirical evidence presented in this study indicates that political contributions and corruption are complements, rather than substitutes. Based on panel data for seven election cycles, regression results show that in the United States, political contributions and federal corruption convictions are positively correlated. Accordingly, we propose an alternative explanation for the relationship between political contributions and corruption: two components of a comprehensive strategy for rent-seeking. As long-term investments, political contributions influence legislators to change the rules of the game; as short-term investments, corruption influences public officials to sidestep the existing rules, in order to maximize the rent collected.     

重塑地方政府经济行为的理论思考

构建服务型政府,提升地方政府的公共服务能力,对地方政府经济行为的科学性、合理性提出了更高的要求。目前我国地方政府经济行为的扭曲现象依然比较严重,制约了地方政府经济运行效率的提高。深刻剖析地方政府经济行为扭曲的原因,探求重塑地方政府经济行为的途径,对于提高地方政府公共服务能力,促进经济社会事业发展具有重要意义。     

The Impact of Placing Adolescent Males into Foster Care on Education,Income Assistance,and Convictions

Understanding the causal impacts of taking at‐risk youth into government care is part of the evidence base for policy. Two sources of exogenous variation affecting alternative subsets of the at‐risk population provide causal impacts interpreted as local average treatment effects. Placing 16‐ to18‐year‐old males into care decreases or delays high school graduation, increases income assistance receipt, and has alternative effects on criminal convictions depending upon the instrument employed. This suggests that asking whether more or fewer children should be taken into care is insufficient; it also matters which, and how, children are taken into care.     

The principle of institutional direction: Coase's regulatory critique of intervention

That Coase's political convictions changed from an early socialismto a later neo-liberalism stands in apparent contrast to thetheoretical consistency of his early (‘The Nature of theFirm’) and later (‘The Problem of Social Cost’)contributions to economics. Offering further evidence abouthis early views in particular, this paper takes a fresh lookat Coase's views on competition and antitrust to show that heconsistently stressed the role of what we shall call the principleof ‘institutional direction’, and that this principleinvolves an important criticism of both neo-liberal and socialistviews on regulation and state intervention.     

Simple Rules for the Optimal Taxation of International Capital Income

In this paper we reconcile and extend previous results on the collectively optimal taxation of international investment income. The “weighted average” rule of Horst (1980), for example, is shown to rest on unattractive assumptions on the set of instruments available, ruling out any need for distorting taxes. The principal contribution is to establish a new and strikingly simple weighted average rule — encompassing the other key result in this area — for the general case in which lump-sum taxes are unavailable, the ability to tax pure profits is perhaps restricted and distorting taxes on both domestic and border-crossing capital income are optimally deployed.     

Optimal credit rationing in not‐for‐profit financial institutions*

We examine the dynamic optimization problem for not‐for‐profit financial institutions (NFPs) that maximize consumer surplus, not profits. We characterize the optimal dynamic policy and find that it involves credit rationing. Interest rates set by mature NFPs will typically be more favorable to customers than market rates, as any surplus is distributed in the form of interest rate subsidies, with credit rationing being required to prevent these subsidies from distorting loan volumes from their optimal levels. Rationing overcomes a fundamental problem in NFPs; it allows them to distribute the surplus without distorting the volume of activity from the efficient level.     

Import Protection Bias

Rodrik (1995) notes that trade regimes tend to be biased towards import protection, while the standard political economy models either yield no prediction on the bias of the trade regime or predict, counterfactually, a bias towards the export sector. This constitutes an important shortcoming in the political economy of trade literature. In this paper, the Grossman and Helpman (1994 ) “Protection for Sale” model is extended by adding government expenditure. This expenditure may be financed via a combination of tariff revenue and a distorting wage tax. In addition to the government expenditure, export subsidies need to be financed either via tariff revenue or a distorting wage tax. With this addition, plausible values of the model's parameters yield import protection bias.     

Should we tax or cap political contributions? A lobbying model with policy favors and access

This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.     

THE TWO‐WAY RELATIONSHIP BETWEEN GOVERNMENT SPENDING AND CORRUPTION AND ITS EFFECTS ON ECONOMIC GROWTH

The existing empirical evidence suggests that in low‐income economies, an increase in government spending leads to a reduction of growth. This article aims to explain this empirical fact by considering a growth model that incorporates a two‐way relationship between corruption and government spending. That is, government spending gives rise to corruption and rent seeking, which feeds back by distorting the structure and size of government spending. In addition, the cost of corruption depends on the wage rate. Therefore, in low‐income economies, increases in government spending tend to generate larger social losses caused by a higher level of rent dissipation and a concomitant rise in corruption and government inefficiency. Consequently, in such economies, an increase in government spending is more likely to result in a decline of economic growth. (JEL H3, O11, O41)     

FURTHER THOUGHTS ON THE BANKING IMPUTATION IN THE NATIONAL ACCOUNTS*

The banking problem in the National Accounts arises because interest rates paid by banks on deposits are generally lower than the rates charged for loans and service charges levied by banks are generally less than the cost of the banking services provided. This paper offers two explanations for such observations: first there is the new neo-classical theory of private banking and central banking which suggests that they arise because of distorting “taxes” levied by regulating central banks. Second there is the Keynesian theory which accounts for the observations by the fact that the public good services of monetary stabilization supplied directly by the central banks and indirectly by private banks cannot be priced. Both theories account for the empirical observations giving rise to the banking problem. Neither theory lends support to the banking imputation currently carried out in most National Accounts.     

The trade distorting effect of state trading enterprises in importing countries

This paper focuses on the potential trade distorting effect of state trading enterprises, an issue that is likely to receive greater attention than hitherto in the context of the current agricultural negotiations in the WTO. Although state trading enterprises can arise in both exporting and importing countries, the emphasis here is on the importing country case. Our results show that state trading enterprises do distort trade, though the nature of the distortion (i.e., whether it is equivalent to an import tariff or import subsidy) depends on the nature of exclusive rights bestowed by government on the state enterprise. We also consider state trading enterprises in both developed and developing economies, the main difference being the nature of the government's pay-off function. The theoretical framework allows us to derive the tariff equivalent effects for various types of STEs, the results suggesting that the trade distorting effect is likely to vary considerably dependent on the type of STE that arises in particular circumstances.     

Enforcement of resource allocation mechanisms and second best industrial policy

If a number of firms deviate from the rules of behavior laid down by the planner and this distorting behavior is accepted as a constraint upon the system, then for a wide class of such distortions it is welfare optimal for all other agents to continue following the rules. This result leads to the design of a piecemeal industrial policy that is always welfare enhancing.     

NEW INSIGHTS INTO THE DECLINE OF ANTITRUST ENFORCEMENT

The total number of cases that the Antitrust Division has filed during the past decade has increased, but the number of significant criminal price-fixing cases has declined. Policy changes have had significant effects on other areas of enforcement. This paper argues, however, that the decline in this dimension of antitrust enforcement can be explained by a 1974 act of Congress that increased criminal penalties for price-fixing violations from the misdemeanor level to the felony level. According to this argument, the stiffer penalties' deterrent impact has reduced the supply of antitrust violations. In this respect, the analysis highlights the flaws in measuring the strength of enforcement from the frequency of cases filed. In addition, the paper reports empirical evidence from a multinomial logit model of defendant plea choice indicating that the felony penalties encourage defendants to plead not guilty more frequently. Furthermore, data on the outcomes of criminal antitrust cases reveal that the government has greater difficulty in obtaining convictions when felony penalties apply. From the viewpoint of enforcers, these findings imply that detecting and prosecuting significant price-fixing violations is more difficult. This, in turn, helps explain the reduction in related private enforcement.