Showing papers in "Public Choice in 2002"
TL;DR: In this paper, the authors investigated what specific types of economic freedom measures are important for growth and the robustness of the results is carefully analyzed since the potential problem with multicollinearity is one of the negative effects of decomposing an index.
Abstract: Most studies of the relation between economic freedom andgrowth of GDP have found a positive relation One problem inthis area is the choice of economic freedom measure A singlemeasure does not reflect the complex economic environment anda highly aggregated index makes it difficult to draw policyconclusions In this paper we investigate what specific typesof economic freedom measures that are important for growthThe robustness of the results is carefully analysed since thepotential problem with multicollinearity is one of thenegative effects of decomposing an index The results showthat economic freedom does matter for growth This does notmean that increasing economic freedom, defined in generalterms, is good for economic growth since some of thecategories in the index are insignificant and some of thesignificant variables have negative effects
353 citations
TL;DR: This article showed that the traditional rent-seeking theory misunderstands three factors: first, the impact of a corrupt monopoly on the rent's size; second, corruption as a motivation for supplying preferential treatment; and third, corruption involves a narrow range of interests than those of competitive lobbying.
Abstract: The rent-seeking theory was one of thefirst economic instruments developed tomodel corruption in the public sector.Comparing corruption with lobbying, itproposes that the former is the lesser oftwo evils, since lobbying entails the wastage of resources inthe competition forpreferential treatment. This study showsthat the traditional rent-seeking theorymisunderstands three factors: first, theimpact of a corrupt monopoly on the rent'ssize; second, corruption as a motivationfor supplying preferential treatment andthird; that corruption involves a narrowerrange of interests than those ofcompetitive lobbying. Taking these factorsinto consideration, the opposite argumentis valid: corruption has worse welfareimplications than alternative rent-seekingactivities.
272 citations
TL;DR: In this paper, the mismatch between revenue generation and expenditure in U.S. states was examined empirically, and the authors found that larger federal transfers are associated with higher rates of conviction for abuse of public office, supporting the theory that soft-budget constraints created by federal transfers were potentially problematic.
Abstract: While some recent evidence suggests that more decentralization is associated with reduced corruption, no empirical work has examined whether different types of decentraliz- ation have differential effects on corruption. The theoretical literature has emphasized that expenditure decentralization will only be effective if accompanied by the devolution of rev- enue generation to local governments. In this paper we examine this hypothesis empirically, by studying the mismatch between revenue generation and expenditure in U.S. states. Larger federal transfers are associated with higher rates of conviction for abuse of public office, supporting the theory that soft-budget constraints created by federal transfers are potentially problematic.
263 citations
TL;DR: In this article, the authors investigated the role that economic freedom plays in economic growth and in the distribution in market income, the role of government policy in advancing economic progress and in promoting income equality, and the effect that the rate of economic progress has on the distribution of market income.
Abstract: This study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome, the role of government policy in advancingeconomic progress and in promoting income equality, and the effectthat the rate of economic progress has on thedistribution of market income. Structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity, and that there is apositive but relatively small trade-off between growth andincome inequality.
251 citations
TL;DR: In this article, the authors examine the system of Qualified majority voting, used by the Council of the European Union, from the perspective of enlargement of the Union, using an approach based on power indices due to Penrose (1946), Banzhaf (1965) and Coleman (1971) to make two analyses: (1) the voting power of member countries from the point of view of fairness, and (2) the question of how the threshold number of votes required for QMV should be determined.
Abstract: This paper examines the system of Qualified Majority Voting, used by the Council of the European Union, from the perspective of enlargement of the Union. It uses an approach based on power indices due to Penrose (1946), Banzhaf (1965) and Coleman (1971) to make two analyses: (1) the question of the voting power of member countries from the point of view of fairness, and (2) the question of how the threshold number of votes required for QMV should be determined. It studies two scenarios for change from 2005 onwards envisaged by the Nice Treaty: (1) no enlargement, the EU comprising 15 member countries, and (2) full enlargement to 27 members by the accession of all the present twelve candidates. The proposal is made that fair weights be determined algorithmically as a technical or routine matter as the membership changes. The analysis of how the threshold affects power shows the trade-offs that countries face between their blocking power and the power of the Council to act. The main findings are: (1) that the weights laid down in the Nice Treaty are close to being fair, the only significant discrepancies being the under-representation of Germany and Romania, and the over-representation of Spain and Poland; (2) the threshold required for a decision is set too high for the Council to be an effective decision making body.
178 citations
TL;DR: In this article, the authors focus on the issue of the electoral and ideological cycles in state government budget for the eleven Western German Lander and verify this hypothesis over the period 1974-1994 for the following budgetary variables: totalexpenditures, surplus/deficit, administration, health care, education, roads and social security benefits.
Abstract: This paper focuses on the issue of the electoral andideological cycles in state government budget for the elevenWestern German Lander. We verify this hypothesis over theperiod 1974–1994 for the following budgetary variables: totalexpenditures, surplus/deficit, administration, health care,education, roads and social security benefits. While overallour results seem to show that generally the party variabledoes not play a systematic role in spending decisions, theyprovide some support to the opportunistic cycle theory showingthat the only relevant phenomenon is the effect of theupcoming election on the government spending inclinations.
178 citations
TL;DR: In this article, a rent-seeking model with N asymmetric contestants is considered and a pure strategy Nash equilibrium solution is obtained, where each contestant may have a different valuation of the rent or a different relative ability to win the rent.
Abstract: This article considers a rent-seeking model with N asymmetriccontestants. Each contestant may have a different valuation ofthe rent or a different relative ability to win the rent. Oneof the N contestants is selected as the winner based onTullock's probabilistic contest rule with constant returns toscale. A pure strategy Nash equilibrium solution is obtainedand its consequences are investigated.
166 citations
TL;DR: In this paper, a political economy model for the allocation of public infrastructure investment grants is proposed to estimate the contribution of infrastructure accumulation to private production, and the authors find that public capital is a significant factor in private production.
Abstract: This paper proposes a simultaneous-equation approach to theestimation of the contribution of infrastructure accumulationto private production. A political economy model for theallocation of public infrastructure investment grants isformulated. Our empirical findings, using a panel of largeGerman cities for the years 1980,1986, and 1988, suggest thatcities ruled by a council sharing the State (`Bundesland')government's current political affiliation were particularlysuccessful in attracting infrastructure investment grants.With regard to the contribution of infrastructure accumulationto growth, we find that public capital is a significant factorin private production. Moreover, at least for the samplestudied, we find that simultaneity between output and publiccapital is weak; thus, feedback effects from output toinfrastructure are negligible.
116 citations
TL;DR: In this article, the authors provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations, and then compare the lottery and the all-pay auction models of lobbying.
Abstract: I first provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations, and then compare the lottery and the all-pay auction models of lobbying. I show that the exclusion principle discovered by Baye, Kovenock and de Vries (1993) for all-pay auction does not apply to lottery. I also show that the perverse effect that an exogenous cap may increase the total lobbying expenditure in a two-bidder all-pay auction discovered by Che and Gale (1998) does not apply to lottery.
115 citations
TL;DR: For instance, the authors found a strong, positive relationship between political expressiveness and the act of voting in the US National Election Surveys, and the propensity of an individual to vote and engage in other forms of ''expressive'' behavior.
Abstract: It has been suggested that voting may be an ``expressive''action taken without regard to any hope of actuallyinfluencing election outcomes on the margin. However, therehas been no real-world evidence brought to bear on thequestion of whether the propensity of an individual to voteand the propensity of that same individual to engage in otherforms of ``expressive'' behavior are correlated in anystatistically meaningful sense. Drawing from longitudinal datafound in the National Election Surveys we report compellingevidence of a strong, positive relationship between what weterm ``political expressiveness'' and the act of voting.
96 citations
TL;DR: In this paper, the authors argue that the influence of voters on the political agenda is strong and that policymimicking does not matter in circumstances of direct legislation and fiscal autonomy.
Abstract: Previous empirical literature hasshown that in order to overcome agencyproblems voters make inter-jurisdictionalcomparisons of fiscal performance whenmaking electoral decisions. Incumbents therefore anticipate voters'feedback by copying fiscal policy decisionsfrom neighbors. This paper argues thatfiscal autonomy (exit) as well as directlegislation (voice) enrich politicalcompetition, reducing thus the influence of electoral competition onfiscal decisions. Consequently, policymimicking does not matter in circumstancesof direct legislation and fiscal autonomywhere the impact of voters on the politicalagenda is particularly strong. Based onpanel data between 1980 and 1998 we findencouraging evidence supporting ourtheoretical arguments.
TL;DR: The authors identify conditions under which liberal reporters orpolitically-driven media magnates can achieve ideological goals and illuminate important barriers that prevent many would-be public opinion leaders from ever satisfying these conditions.
Abstract: Do news organizations purposefullylead the public to support a particularideological agenda? When debating thisquestion, many analysts draw conclusionsfrom weak empirical evidence. We introducea model that clarifies how a newsorganization's internal structure combineswith market forces to affect when it canlead public opinion. We identify conditionsunder which liberal reporters orpolitically-driven media magnates canachieve ideological goals. We alsoilluminate important barriers that preventmany would-be public opinion leaders fromever satisfying these conditions. We showthat internal structure and market forcesare critical determinants of any newsorganization's power over public opinion.
TL;DR: This paper examined the extent to which benefits received from the Unemployment Insurance Programdisplace assistance that the unemployed receive from the extended family and found that benefits displace familial support by as much as 24-40 cents per dollar.
Abstract: The objective of this study is to examine the extent to whichbenefits received from the Unemployment Insurance Programdisplace assistance that the unemployed receive from theirextended family. Using data from a supplement to the PanelStudy of Income Dynamics, it is found that the unemployedreceive private support and that these private networks arefairly pervasive; twenty-nine percent of those receivingUnemployment Insurance benefits also receive cash transfersfrom their family or friends. Moreover, it is found thatunemployment benefits displace familial support by as much as24–40 cents per dollar.
TL;DR: In this paper, the allocation of resources across industries in state capital areas with non-capital areas is compared using 4-digit industry data by county, and the results provide the first direct evidence and measurement of the forgone productive activity resulting from resources being reallocated toward rent seeking and interest group activity.
Abstract: Utilizing 4-digit industry data by county, we compare the allocation of resources across industries in state capital areas with noncapital areas. We are able to identify which industries are expanded and contracted relative to noncapital areas. Our results provide the first direct evidence and measurement of the forgone productive activity resulting from resources being reallocated toward rent seeking and interest group activity. Our data also allow us to measure total rent seeking, and also to isolate the extent of indirect and in-kind rent seeking, which can account for part of the Tullock paradox.
TL;DR: Ourdata et al. as discussed by the authors show that there is a very strong rightward drift in the composition of the Supreme Court as they move from the Warren Court to the Burger Court, and again as we move from Burger Court tothe Rehnquist Court.
Abstract: Given the fundamental unidimensionality in thedata on Supreme Court voting patterns1951–1993 we observe, we are able todetermine the identity of ``median'' membersof each court in a fashion that does notrequire subjective coding of the extent towhich particular cases reflect left-rightissues. Also, while the exact numericalvalues of MDS-obtained locations cannot becompared across different ``natural courts'',the positions of Supreme Court justicesacross their careers relative to the courtson which they served can be traced. Ourdata show overwhelming quantified evidenceof a very strong rightward drift (relativeto our MDS defined dimensions) in thecomposition of the court as we move fromthe Warren Court to the Burger Court, andagain as we move from the Burger Court tothe Rehnquist Court.
TL;DR: A fuzzy variant of the Borda count taking into account agents' intensities of preference is obtained by means of score gradation and normalization processes from its original pattern, providing an appropriate scheme in collective decision making.
Abstract: In this paper we consider a fuzzy variantof the Borda count taking into accountagents' intensities of preference. Thisfuzzy Borda count is obtained by means ofscore gradation and normalization processesfrom its original pattern. The advantagesof the Borda count hold, and are evenimproved, providing an appropriate schemein collective decision making. In addition,both classic and fuzzy Borda counts arerelated to approval voting, establishing aunified framework from distinct points ofview.
TL;DR: In this article, the authors used the recently opened Soviet state and party archives to show the process that began in the 1930s of transforming the inner circle of the Sovietstationary bandit into a rent-seeking bureaucracy lacking long-term goals.
Abstract: Studies of the mature Soviet economy focus on the structuralweaknesses of rent seeking and corruption. Such an economy ispresumed to perform better in its adolescent phase under astrong stationary-bandit dictator, dedicated to growth andable to control rent-seekers. We use the recently openedSoviet state and party archives to show the process that beganin the 1930s of transforming the inner circle of the Sovietstationary bandit into a rent-seeking bureaucracy lackinglong-term goals.
TL;DR: In this paper, the authors developed and tested a model of voter turnout that permits them to differentiate turnout rates for governmentemployees and other citizens, controlling for the effects of a wide range of other variables relating to turnout.
Abstract: In this paper we develop and test a model of voter turnoutthat permits us to differentiate turnout rates for governmentemployees and other citizens, controlling for the effects of awide range of other variables relating to turnout. Using 1996ANES data, we find that there is a significant difference inturnout rates for bureaucrats and nonbureaucrats, both insimple bivariate analyses and in a full multivariate model.The magnitude and significance of the coefficient forgovernment employment, even in the face of controls, suggeststhere is something about government employment per sethat has an effect on turnout.
TL;DR: In this article, tax structure turbulence is defined as the degree to which a country's tax structure changes from one year to another, and it is shown that in election years, tax structures are changed significantly less than in other years.
Abstract: This paper analyses whether and to what extent politiciansmanipulate tax structures strategically in order to winelections or for ideological purposes. We introduce anindicator for tax structure turbulence which measures thedegree to which a country's tax structure changes from oneyear to another. Using data on 18 OECD countries over theperiod 1965–1995, we find clear evidence of a politicalbudget cycle in national tax structures. More precisely, wefind that in election years, tax structures are changedsignificantly less than in other years. Further, thedispersion of political power significantly lowers the abilityof governments to change the tax structure. We do not,however, find any evidence of partisan budget cycles innational tax systems following political regime changes.
TL;DR: This article found strong evidence of grant illusion (the flypapereffect), similar across tax regimes, with evidence of renterillusion and of less accountability under the property tax, and showed that a priori accountability effects on expenditures are ambiguous.
Abstract: Local tax reform in Britain in 1993 (reinstating a propertytax) may have reversed some intended fiscal illusion reducing,and ``accountability'' improving, features of the poll tax(itself a reform introduced in 1990 with the specific aim ofpromoting accountability). We formalize these features withina median voter model of the demand for local publicexpenditure that distinguishes between accountability andfiscal illusion effects. The model shows that a prioriaccountability effects on expenditures are ambiguous.Available data for England and Wales are used to test themodel. We find strong evidence of grant illusion (the flypapereffect), similar across tax regimes, with evidence of renterillusion and of less accountability under the property tax.The degree of local income inequality appears to affectexpenditure levels only with the property tax.
TL;DR: In this paper, the authors examined the influence of ideology on the time path of a policy and found that female labor force participation and the associated ability to tax femaleproductivity is the most important factor associated with government, and it alone explains about 60% of the actual growth of government.
Abstract: Theories of the size of government focus on either the demandfor government or the supply of tax revenues. Demand sidetheories such as those of Peltzman, Meltzer and Richard,Husted and Kenny, and Lott and Kenny are essentially politicaltheories. They emphasize the role of voters or interest groupsin expanding government. Supply side theories such as those ofKau and Rubin, Baumol, West, and Ferris and West emphasize theability of government to collect taxes. In this paper, wecombine both demand and supply side theories. For demand, weuse the Poole-Rosenthal time series data on the ideology ofCongress, on the theory that all political forces mustultimately express themselves in voting which is measured byideology. For supply, we use the Kau-Rubin measures of theability of government to collect taxes as a function of thedeadweight costs of tax collection and ability of individualsto hide revenues. We find that female labor forceparticipation and the associated ability to tax femaleproductivity is the most important factor associated withgovernment, and it alone explains about 60% of the actualgrowth of government. The ideology of the Senate is alsosignificant, but has a small effect. This paper may be thefirst to examine the influence of ideology on the time path ofa policy; other research examining ideology (including ours)has been cross sectional. Further research on the role ofideology in changing policies over time is clearly warranted.
TL;DR: An analysis of the flypaper effect under different institutional contexts is carried out for Colombia, where during the decentralization process different sub-national fiscal structures with different degrees of autonomy to manage transfers,expenditures, taxes and debt have coexisted as discussed by the authors.
Abstract: An analysis of the flypapereffect under different institutionalcontexts is carried out for Colombia,where during the decentralizationprocess different sub-national fiscalstructures with different degrees ofautonomy to manage transfers,expenditures, taxes and debt havecoexisted. The analysis is carried outby using panel data models andalternative functional forms. Theresults show that the flypaper effectis observed when sub-national entitiesare highly dependent onintergovernmental transfers. Ananalysis of asymmetries in response totransfers shows that sub-nationalauthorities try to cover the reductionin transfers when the percentage oftransfers into the total currentrevenue is high.
TL;DR: In this article, the authors suggest an explanation for the geographical dimension of tax evasion that focuses on the structure of territorial government and suggest that tax evasion may be accepted as a compensation for the welfare loss deriving from too highcentrally set tax rates.
Abstract: The paper suggests anexplanation for the geographical dimensionof tax evasion that focuses on thestructure of territorial government. Taxesadministered by the central government arenot differentiated by regions. Poor areasmay prefer a combination of lower taxes andlower levels of public services at both thecentral and the local level. This isespecially true when income and wealthlevels differ among the areas and thedemand for publicly provided goods iscorrelated to these levels. But the use ofnationally uniform tax schedules imposes awelfare burden on poorer areas. While thetax rates of local taxes can be adjusted tolocal preferences, tax evasion may betacitly accepted as a compensation for thewelfare loss deriving from too highcentrally set tax rates.
TL;DR: In this paper, the authors propose a microeconomic framework for the analysis of political corruption in economic growth, where alternative politicians compete with the incumbent politician but benefit from a common political reputation.
Abstract: The article tries to incorporate "political corruption" (top level corruption) into economic growth analysis. We propose a microeconomic framework. An agent of the public sector, who wants to optimize his cash flow resulting from budget misappropriations, will be highly sensitive to the instability related to his office. The natural equilibrium for the politician will be to fall into a 'high political instability - low growth' trap, in which corruption appears endemic. However, the control of corruption by society will be possible. We consider a model in which alternative politicians compete with the incumbent politician but benefit from a common political reputation. It is shown that this situation leads to "dynamic collective reputation", which should restrain misappropriation practices. This theoretical framework will be useful in defining a "sustainable" degree of political competition and in understanding the asymmetric effects of extrinsic shocks on the growth process.
TL;DR: In this paper, a sequential election contest, such as the American presidential primary, is studied, in which several electionsoccur one at a time until a single winner emerges, and it is shown that a candidate with friendly elections at the end of the contest will typically benefit from the resulting game theoretic competition.
Abstract: This paper studies a sequential election contest, such as theAmerican presidential primary, in which several electionsoccur one at a time until a single winner emerges. Theconventional wisdom is such a system benefits a candidatefavored in the initial elections because of momentum. Thispaper uncovers a potentially opposing force if participationis costly and candidates exit when they have unfavorablefuture prospects. A candidate with friendly elections at theend of the contest will typically benefit from the resultinggame theoretic competition.Tension between this strategic effect and momentum helpsexplain several empirical regularities of presidentialprimaries.
TL;DR: In this article, the authors examined the motivation of political action committees in their campaign contributions and the effect of contributions on the 1996 House of Representatives elections and on the candidates' policy stances.
Abstract: This paper examines the motivation ofpolitical action committees in theircampaign contributions The paper estimatesthe effect of contributions on the 1996House of Representatives elections and onthe candidates' policy stancesContributions to challengers have a largeimpact on election outcomes but incumbentreceipts do not On four of the five issuesexamined, interest groups responded tocandidate positions rather than givingfunds to influence them These results areconsistent with an electoral motive forcontributions Some evidence is presentedthat contributions to incumbents may begiven to secure unobservable services forthe PAC
TL;DR: In this paper, the effect of population size on political participation and allocating efficiency is analyzed, and it is shown that increasing population size shifts power to the rich and reduces political participation.
Abstract: This paper analyzes the effect of population size on politicalparticipation and allocative efficiency. Increasing populationis generally found to reduce political participation. However,since participation is not evenly spread throughout thepopulation, this will have consequences for allocation.Namely, we argue that increasing population size shifts powerto the rich. We discuss the consequences for the optimal sizeof jurisdictions, the size of government, and the measurementof publicness.
TL;DR: In this paper, the authors examine three measures of electoralinstitutional structure that arehypothesized to be instrumental determinants of the level of rent seekings success, i.e., the type of electoralsystem, pluralistic or proportional; method of selection of the chief executive,presidential or parliamentary; and thenumber of electoral districts.
Abstract: The role of institutions as determinants ofrent seeking success is well established. In this paper, we focus on institutionsthat have received little attention in theliterature, namely electoral institutions. We examine three measures of electoralinstitutional structure that arehypothesized to be instrumental indetermining the level of rent seekingsuccess. These are the type of electoralsystem, pluralistic or proportional; methodof selection of the chief executive,presidential or parliamentary; and thenumber of electoral districts. An index ofeconomic freedom is used as the metric forrent seeking opportunities created bygovernments. Theoretical implications ofvariation in these electoral institutionsare developed. These implications areempirically tested employing data from 29countries classified as having emergingmarket economies. Countries with emergingeconomies are expected to exhibit moreinstitutional flexibility that moredeveloped countries whose property rightsare well established and defended. Theempirical results are controlled fordifferences in a number of demographic andhistorical factors. Plurality electoralsystems are more resistant to the politicaldemands of rent seeking than proportionalsystems. Fewer election districts seem toreduce rent seeking opportunities. However, conditional on the type ofelectoral system, presidential systems arefound to be no more resistant to rentseeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a country's resistanceto rent seeking while military spending andyears of institutional entrenchment reduceit.
TL;DR: In this article, the economic incentives inherent in raffle fundraisers are explored, and it is shown that offering a prize can increase contributions to apublic good by more than the value of the prize.
Abstract: Charitable organizations, such as schools and churches, oftenuse raffles to raise money. This article explores the economicincentives inherent in raffle fundraisers. Raffling off aprize is compared to simply asking for voluntary contributions(i.e., a raffle without a prize). Even if every contributor isrisk-averse, offering a prize can increase contributions to apublic good by more than the value of the prize. Thus, tyingcontributions to a raffle can increase the equilibrium supplyof a public good. Moreover, there exists a raffle prize thatmaximizes the supply of public good over other prizes.