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Abstract:
Gaps in welfare attainment between boys and girls in China have attracted international attention. In this paper demand analysis is used to try and uncover the factors which may be driving the emergence of the gender gaps. Drawing on household expenditure data from a poor (Sichuan) and rich (Jiangsu) Chinese province we are able to test for different types of gender bias in intra-household allocation. Spending on health is found to be biased against young girls in the poor but not in the rich province, whereas there is a bias in education spending against older girls in both provinces. These biases in household spending were found to correspond to gender biases in mortality and enrolment outcomes as revealed in census data for the same year. Split sample analysis reveals that poorer, less diversified households exhibit stronger biases against girls. Taken together, the results suggest that son preference in rural China is not driven solely by cultural factors pointing to a potential role for public policy.

Abstract:
The determinants of government responsiveness to its citizens is a key issue in political economy. Here, we develop a model based on the solution of political agency problems. Having a more informed and politically active electorate strengthens incentives for governments to be responsive. This suggests that there is a role for both democratic institutions and mass media in ensuring that the preferences of citizens are reflected in policy. The ideas behind the model are tested on panel data from India. We show that state governments are more responsive to falls in food production and crop flood damage via public food distribution and calamity relief expenditure where newspaper circulation is higher and electoral accountability greater.

Abstract:
The determinants of government responsiveness to its citizens is a key issue in political economy. Here, we develop a model based on the solution of political agency problems. Having a more informed and politically active electorate strengthens incentives for governments to be responsive. This suggests that there is a role for both democratic institutions and mass media in ensuring that the preferences of citizens are reflected in policy. The ideas behind the model are tested on panel data from India. We show that state governments are more responsive to falls in food production and crop flood damage via public food distribution and calamity relief expenditure where newspaper circulation is higher and electoral accountability greater.

Abstract:
The determinants of government responsiveness to its citizens is a key issue in political economy. Here we develop a model based on the solution of political agency problems. Having a more informed and politically active electorate strengthens incentives for governments to be responsive. This suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy. The ideas behind the model are tested on panel data from India. We show that public food distribution and calamity relief expenditure are greater, controlling for shocks, where governments face greater electoral accountability and where newspaper circulation is highest.

Disaster relief, government responsiveness, mass media, newspapers, political accountability, political agency, political economy, public food distribution, social protection

Abstract:
This paper analyzes the role of public and private responsibility in the provision of public goods. We emphasise that a typical public good will require many different inputs which raises the possibility of partnerships to exploit comparative advantages of different parties. But hold-up problems due to contractual incompleteness in specifying tasks discourage separation of ownership and management. We extend our analysis to examine the role of project design or 'ideology' as a separate non-contractible input, and the possibility of crowding out in the form of a less caring government being elected, because of the presence of private providers. The main application developed here is to NGOs in developing countries which, in the last two decades, have been increasingly involved in various capacities in the provisions of a wide range of public goods and services.

Abstract:
This paper uses household data from India to examine the economic and social status of village politicians, and how individual and village characteristics affect politician behavior while in office. Education increases the chances of selection to public office and reduces the odds that a politician uses political power opportunistically. In contrast, land ownership and political connections enable selection but do not affect politician opportunism. At the village level, changes in the identity of the politically dominant group alters the group allocation of resources but not politician opportunism. Improved information flows in the village, however, reduce opportunism and improve resource allocation.

Development, Political Economy, Public Provision of Private Goods, Decentralization

Abstract:
One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.

Abstract:
One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.

US south, voting restrictions, political competition, economic growth

Abstract:
One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.

Abstract:
One of the key goals of political economy is to understand how institutional arrangements shape policy outcomes. This paper studies a comparatively neglected aspect of this - the forces that shape heterogeneous performance of autocracies. The paper develops a simple theoretical model of accountability in the absence of regularized elections. Leadership turnover is managed by a selectorate - a group of individuals on whom the leader depends to hold onto power. Good policy is institutionalized when the selectorate removes poorly performing leaders from office. This requires that the selectorate's hold on power is not too dependent on a specific leader being in office. The paper looks empirically at spells of autocracy to establish cases where it has been successful according to various objective criteria. We use these case studies to identify the selectorate in specific instances of successful autocracy. We also show that, consistent with the theory, leadership turnover in successful autocracies is higher than in unsuccessful autocracies. Finally, we show by exploiting leadership deaths from natural causes that successful autocracies appear to have found ways for selectorates to nominate successors without losing power - a feature which is also consistent with the theoretical approach.

Autocracy, democracy, development, dictatorship, political economy

Abstract:
One of the key goals of political economy is to understand how institutional arrangements shape policy outcomes. This paper studies a comparatively neglected aspect of this - the forces that shape heterogeneous performance of autocracies. The paper develops a simple theoretical model of accountability in the absence of regularized elections. Leadership turnover is managed by a selectorate - a group of individuals on whom the leader depends to hold onto power. Good policy is institutionalized when the selectorate removes poorly performing leaders from office. This requires that the selectorate's hold on power is not too dependent on a specific leader being in office. The paper looks empirically at spells of autocracy to establish cases where it has been successful according to various objective criteria. We use these case studies to identify the selectorate in specific instances of successful autocracy. We also show that, consistent with the theory, leadership turnover in successful autocracies is higher than in unsuccessful autocracies. Finally, we show by exploiting leadership deaths from natural causes that successful autocracies appear to have found ways for selectorates to nominate successors without losing power - a feature which is also consistent with the theoretical approach.

Abstract:
In this speech, Professor Tim Besley, a member of the Monetary Policy Committee, considers the relationship between interest rates and consumer spending, and the factors that may determine how consumption evolves over the medium term. Professor Besley argues that there are a number of reasons why short-term disposable income changes explain changes in consumption. Access to credit is one such factor. He urges caution in assessing the link between house prices and consumption growth and cites evidence that 'consumption growth of renters is associated with house price growth just as strongly as the consumption growth of owners'. But there may be a role for housing collateral in affecting overall credit conditions available to households allowing them greater flexibility to smooth through fluctuations in their disposable income. He concludes that reading the trends in consumption in recent months and trying to form a judgment where things are going is fraught with difficulty. It is logical to expect some weakening of consumption growth to reflect the monetary tightening that has taken place. But there is considerable uncertainty about the speed at which this will happen and it could be some time before the data give us a clear picture of the trend.

Abstract:
A unifying theme in the literature on organizations such as public bureaucracies and private non-profits is the importance of missions, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This paper studies incentives in such contexts and emphazises the role of matching principals' and agents' mission preferences in increasing organizational efficiency. Matching economizes on the need for high-powered incentives. However, it can also entrench bureaucratic conservatism and resistance to innovations. The framework developed in this paper is applied to school competition, incentives in the public sector and in private non-profits, and the interdependence of incentives and productivity between the private for-profit sector and the mission-oriented sector through occupational choice.

Abstract:
A unifying theme in the literature on organizations, such as public bureaucracies and private non-profits, is the importance of missions, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This Paper studies incentives in such contexts and emphasizes the role of matching principals' and agents' mission preferences in increasing organizational efficiency and reducing the need for high-powered incentives. The framework developed in this Paper is applied to non-profits, school competition, and incentives in the public sector.

Competition, incentives, non-profits

Abstract:
This paper takes a fresh look at the trade-off between centralized and decentralized provision of local public goods. The point of departure is to model a centralized system as one in which public spending is financed by general taxation, but districts can receive different levels of local public goods. In a world of benevolent governments, the disadvantages of centralization stressed in the existing literature disappear, suggesting that the case for decentralization must be driven by political economy considerations. Our political economy analysis assumes that under decentralization public goods are selected by locally elected representatives, while under a centralized system policy choices are determined by a legislature consisting of elected representatives from each district. We then study the role of taste heterogeneity, spillovers and legislative behavior in determining the case for centralization.

Abstract:
In this speech, Professor Tim Besley, a member of the Monetary Policy Committee, reports on research on the relationship between consumption growth and access to finance for UK households. Professor Besley argues that improved access to financial markets over the past 20 years has allowed consumers to smooth expenditures associated with purchases of durable goods, such as housing, and has allowed for greater opportunities for borrowing and/or for saving. He presents a specific quantitative measure of the terms on which households have accessed the credit market over 31 years - the Household External Finance (HEF) index. Periods of credit market tightness, as measured by high values of the HEF index, are associated with periods of weak consumption growth. He notes that the HEF index seems to play a role in explaining household consumption alongside other traditional variables, and that these relationships are most prevalent among younger households. He concludes that considerable weight should be placed on conditions in financial markets in understanding the transmission of monetary policy to the real economy. But there is a great deal of uncertainty, and depending on how credit market conditions stabilise, this may have only a temporary effect on consumption growth.

Abstract:
It has long been recognized that the media play an essential role in government accountability. However, even in the absence of censorship, the government may influence news content by maintaining a "cozy" relationship with the media. This paper develops a model of democratic politics in which media capture is endogenous. The model offers insights into the features of the media market that determine the ability of the government to exercise such capture and hence to influence political outcomes

Abstract:
It is widely recognized that active media can play a role in enhancing political competition by informing voters. Collusion between government and media can, however, undermine this role. We extend the political accountability model to include the presence of media outlets and the possibility that the incumbent exerts influence over them. In equilibrium, the media structure is linked to political outcomes in two ways: directly through its monitoring capacity and indirectly through political capture. We examine evidence both across countries and within India.

Abstract:
In this speech, Professor Tim Besley, a member of the Monetary Policy Committee (MPC), discusses differences and similarities between inflation rates across industrialised economies. Most countries experienced high and volatile inflation during the 1970s and part of the 1980s, and low and stable inflation thereafter. Professor Besley argues that the main contrast between these two periods is a significant change in central bank responses to inflation. Periods of high and volatile inflation were associated with negative real interest rates (ie the policy rate adjusted for inflation) in nine industrialised economies, which can be interpreted as symptomatic of a relaxed monetary policy. The most recent period of low and stable inflation is characterised, in contrast, by positive real rates of interest. The experience of the past suggests that using monetary policy to support the economy in the face of negative productivity shocks had little success. Professor Besley concludes that monetary policy cannot (and should not, therefore, try to) prevent warranted real economy changes, taking place but it can perhaps smooth some of the adjustment in response to the real implications of the credit shock. The MPC will do its best to keep businesses' and households' inflation expectations anchored around the 2% target. This provides the best context to maintain the credibility of the framework that we have in the United Kingdom and allows monetary policy to play its part in maintaining the stability that is needed for households and businesses to plan for the long term.

Abstract:
Recent events in several countries have underscored the importance of good governance in private occupational pension plans. The present Paper uses contract theory to analyse the interplay of residual claims and control rights in private pensions. The residual claimant is the plan sponsor in a defined benefit (DB) plan and the pool of beneficiaries in a defined contribution (DC) plan. The main control rights we examine relate to decisions on funding, asset allocation, and asset management. Under complete contracting, governance can be shown to be neutral: DC and DB plans differ only on risk allocation. If instead contracts are incomplete, a DB (DC) plan should: (1) Assign more vigilance responsibility to the sponsor (beneficiaries); (2) Rely less (more) on trustees; (3) Tend to employ trustees that are professional experts (caring insiders); (4) Assign asset allocation rights to the sponsor (beneficiaries); (5) have strict funding requirements.

Pension fund, governance, private pension

Abstract:
There has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend towards contracting out to the private sector and 'public-private partnerships'. This Paper analyses how ownership matters in public good provision. We show that if contracts are incomplete then the ownership of a public good should lie with a party that values the benefits generated by it relatively more. This is true regardless of whether this party is also the key investor or provides other aspects of the technology.

Public goods, public ownership, public-private partnerships

Abstract:
This paper investigates whether the industrial relations climate in Indian States has affected the pattern of manufacturing growth in the period 1958-92. We show that pro-worker amendments to the Industrial Disputes Act are associated with lowered investment, employment, productivity and output in registered manufacturing. Regulating in a pro-worker direction is also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labour can end up hurting the poor.

Abstract:
This Paper investigates whether the industrial relations climate in Indian states has affected the pattern of manufacturing growth in the period 1958-92. We show that pro-worker amendments to the Industrial Disputes Act are associated with lowered investment, employment, productivity and output in registered manufacturing. Regulating in a pro-worker direction is also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labour can end up hurting the poor.

Industrial relations, labour regulation

Abstract:
This paper uses data on elected village councils in South India to examine the political economy of public resource allocation. We find that the pattern of policy-making reflects politicians' self-interest. Elected councillors benefit from improved personal access to public resources. In addition, the head councillor's group identity and residence influences public resource allocation. While electoral incentives do not eliminate politician opportunism, voters appear able to use their electoral clout to gain greater access to public resources.

Abstract:
This paper uses household data from India to examine the economic and social status of village politicians, and how individual and village characteristics a®ect politician behavior while in o±ce. Education increases the chances of selection to public o±ce and reduces the odds that a politician uses political power opportunistically. In contrast, land ownership and political connections enable selection but do not a®ect politician opportunism. At the village level, changes in the identity of the politically dominant group alters the group allocation of resources but not politician opportunism. Improved information °ows in the village, however, reduce opportunism and improve resource allocation.

Abstract:
This paper uses household data from India to examine the economic and social status of village politicians, and how individual and village characteristics affect politician behavior while in office. Education increases the chances of selection to public office and reduces the odds that a politician uses political power opportunistically. In contrast, land ownership and political connections enable selection but do not affect politician opportunism. At the village level, changes in the identity of the politically dominant group alters the group allocation of resources but not politician opportunism. Improved information flows in the village, however, reduce opportunism and improve resource allocation.

Abstract:
This paper uses household data from India to examine the economic and social status of village politicians, and how individual and village characteristics affect politician behavior while in office. Education increases the chances of selection to public office and reduces the odds that a politician uses political power opportunistically. In contrast, land ownership and political connections enable selection but do not affect politician opportunism. At the village level, changes in the identity of the politically dominant group alter the group allocation of resources but not politician opportunism. Improved information flows in the village, however, reduce opportunism and improve resource allocation.

Public provision of private goods, political economy, decentralization, India

Abstract:
In this speech, Professor Tim Besley, member of the Monetary Policy Committee (MPC), discusses the United Kingdom's long-term structural shift from manufacturing towards services; whether this shift is consistent with increasing prosperity and growth for the UK economy; and the implications for monetary policy. The first key theme of the speech is that what matters is not whether output is in the form of services or manufacturing —it is the move towards the production of higher value added activities that enables the UK economy to progress. Second, the speech notes that over the past ten years we have observed a tendency for consumer services price inflation to run ahead of consumer goods price inflation — therefore we might reasonably expect inflationary pressure at the current time to be coming more from the services sector, in part driven by limited spare capacity. However, changes in overall inflation depend on the balance of demand and supply factors in the economy as a whole, and hence Tim concludes that the structural shift from the production of goods to that of services does not bring about an inflationary bias.

Abstract:
One of the most striking changes in labor market policy of the past fifty years has come in the form of legislation to limit discrimination in the workplace based on race, gender, disability and age. If such measures are to be effective in ending discrimination, they need to be enforced. The latter is dependent on state and federal agencies such as the Equal Employment Opportunities Commission and ultimately the willingness of courts to find in favor of plaintiffs. Courts also play an important role in the evolution of antidiscrimination policy since past decisions create future precedent. This paper asks whether the number of charges filed with government agencies depends on the method by which judges are selected. Popularly elected judges should be expected to have more proemployee preferences (selection) and should move closer to employee preferences (incentives). This should result in fewer anti-discrimination charges being filed in states that appoint their judges. In line with this prediction, this paper uses data on the number of employment discrimination charges filed for the period 1973-2000 and finds that states that appoint their judges have fewer anti-discrimination charges being filed.

Abstract:
One of the most striking changes in labor market policy of the past 50 years has come in the form of legislation to limit discrimination in the workplace based on race, gender, disability and age. If such measures are to be effective in ending discrimination, they need to be enforced. The latter is dependent on state and federal agencies such as the Equal Employment Opportunities Commission and ultimately the willingness of courts to find in favor of plaintiffs. Courts also play an important role in the evolution of anti-discrimination policy since past decisions create future precedent. This paper asks whether the number of charges filed with government agencies depends on the method by which judges are selected. Popularly elected judges should be expected to have more pro-employee preferences (selection) and should move closer to employee preferences (incentives). This should result in fewer anti-discrimination charges being filed in states that appoint their judges. In line with this prediction, this paper uses data on the number of employment discrimination charges filed for the period 1973-2000 and finds that states that appoint their judges have fewer anti-discrimination charges being filed.

Judicial system, discrimination

Abstract:
In recent times there has been a renewed interest in relationships between redistribution, growth and welfare. Land reforms have been central to strategies to improve the asset base of the poor in developing countries though their effectiveness has been hindered by political constraints on implementation. In this paper we use panel data on the sixteen main Indian states from 1958 to 1992 to consider whether the large volume of land reforms as have been legislated have had an appreciable impact on growth and poverty. The evidence presented suggests that land reforms do appear to be associated with poverty reduction.

Abstract:
A rich array of institutional diversity makes the United States an excellent place to study the relationship between political institutions and public policy outcomes. This Paper has three main aims. First, it reviews existing empirical evidence on the relationship between institutional rules, political representation and policy outcomes. It aims to place the literature into a broader context of theoretical and empirical work in the field of political economy. Second, it develops a parallel empirical analysis that updates studies in the literature and re-examines some of the claims made, in a setting unified both in terms of policy outcomes and the period under study. Third, the paper develops some new directions for research, presenting a small number of novel exploratory results.

Empirical political economy, government behaviour

Abstract:
The welfare economic method for analyzing the case for government intervention is often criticised for ignoring the political determination of policies. The standard method of accounting for this critique studies the case for intervention under the constraint that the level of the instrument in question will be politically determined. We criticise this method for its implicit assumption that new interventions will not affect the level of existing policy instruments. We argue that this assumption is particularly misleading in suggesting that political economy concerns must dampen the case for intervention.

Abstract:
This paper presents a theoretical and empirical investigation of tax competition when voters use the tax policy of neighboring jurisdictions as information to evaluate the performance of their incumbent politicians. We show that this has implications both for voter tolerance of high taxes and for the process of tax setting itself. Our empirical results, which use two different tax data sets, confirm the importance of neighbors' taxes both on the probability of incumbent reelection and on tax setting behavior.

Abstract:
This paper studies determinants of MPs expense claims in Parliament using the data released under the freedom of information act in 2004. Using a multiple regression framework, we correlate expenses with three sets of variables: constituency characteristics, party affiliation and individual characteristics. We also look at the ratio of parliamentary expenses claimed to votes cast in parliament as a crude measure of value for money. We use the results to reflect on two views of the motivation of MPs - the Public Choice view and the public service view.

Representative democracy, accountability, British politics, members of parliament, pork barrel

Abstract:
The role of citizens' intitiatives figures prominantly in contemporary debates on constitutional change. A basic question is why are initiatives necessary in a representative democracy where candidates must already compete for the right to control policy? This Paper offers one answer to this question. In a representative democracy, the bundling of issues, together with the fact that citizens have only one vote, means that policy outcomes on specific issues may diverge far from what the majority of citizens want. In such circumstances, allowing citizens to put legislation directly on the ballot permits the 'unbundling' of these issues, which forces a closer relationship between policy outcomes and popular preferences. To the extent that it is condsidered socially undesirable for outcomes on specific issues to stray too far from what the majority wants, this creates a role for citizens initiatives.

Direct democracy, citizens' initiatives

Abstract:
The role of citizens' initiatives figures prominently in contemporary debates on constitutional change. A basic question is why are initiatives necessary in a representative democracy where candidates must already compete for the right to control policy? This paper offers one answer to this question. In a representative democracy, the bundling of issues together with the fact that citizens have only one vote, means that policy outcomes on specific issues may diverge far from what the majority of citizens want. In such circumstances, allowing citizens to put legislation directly on the ballot, permits the unbundling' of these issues, which forces a closer relationship between policy outcomes and popular preferences. To the extent that it is considered socially undesirable for outcomes on specific issues to stray too far from what the majority wants, this creates a role for citizens' initiatives.

Abstract:
This paper contrasts direct election with political appointment of regulators. When regulators are appointed, regulatory policy becomes bundled with other policy issues the appointing politicians are responsible for. Since regulatory issues are not salient for most voters, regulatory policy outcomes reflect the preferences of party elites and special interests. Direct election of regulators strengthens the power of voters by ensuring the salience of regulatory issues. Using panel data on regulatory outcomes from U.S. states, we find evidence in favor of the idea that elected states are more pro-consumer in their regulatory policies.

Abstract:
The welfare economic method for analyzing the case for government intervention is often criticized for ignoring the political determination of policies. While many economists accept the thrust of this critique, exactly when and how political determination interferes with a welfare economic analysis is not well understood. This paper explores the logic of the critique in a specific context, demonstrating how political determination of policy affects the case for government intervention. We show that one form of intervention is likely to have an impact on others through the political process. These spillover effects may even provide a justification for interventions that the welfare economic approach would reject.

Abstract:
Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where policy choices, regulation of markets and tax rates, are constrained by economic institutions, which in turn reflect past investments in legal and fiscal state capacity. We study the economic and political determinants of these investments. The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.

Development, property rights, state capacity

Abstract:
Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where policy choices, regulation of markets and tax rates, are constrained by economic institutions, which in turn reflect past investments in legal and fiscal state capacity. We study the economic and political determinants of these investments. The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.

Abstract:
This paper uses data from U.S. states to investigate whether electoral accountability affects economic policy choices. We set up a model in which the possibility of being re-elected may curtail opportunistic behavior by incumbent governors. We find that facing a binding term limit affects choices on taxes, expenditures, state minimum wages and mandates on workers' compensation. Such effects are found also to vary with the party affiliation of the incumbent. The Democratic party also appears to suffer at the polls following the term of a lame-duck, Democratic incumbent.

Abstract:
This paper studies the incidence of civil war over time. We put forward a canonical model of civil war, which relates the incidence of conflict to circumstances, institutions and features of the underlying economy and polity. We use this model to derive testable predictions and to interpret the cross-sectional and times-series variations in civil conflict. Our most novel empirical finding is that higher world market prices of exported, as well as imported, commodities are strong and significant predictors of higher within-country incidence of civil war.

commodity prices, conflict, natural resources, political institutions

Abstract:
This paper studies the incidence of civil war over time. We put forward a canonical model of civil war, which relates the incidence of conflict to circumstances, institutions and features of the underlying economy and polity. We use this model to derive testable predictions and to interpret the cross-sectional and times-series variations in civil conflict. Our most novel emprical finding is that higher world market prices of exported, as well as imported, commodities are strong and significant predictors of higher within-country incidence of civil war.

Abstract:
The US federal system provides great potential for estimating the effects of policy on behavior. There are numerous empirical studies that exploit variation in policies over space and time. In pursuing this line of enquiry, the issue of policy endogeneity is central. If state policy making is purposeful action, responsive to economic and political conditions within the state, then it may be necessary to identify and control for the forces that lead policies to change if one wishes to obtain unbiased estimates of a policy`s incidence. The aim of this paper is to investigate how recognition of policy endogeneity affects attempts to analyze policy incidence. Throughout, we take a specific context -- workers` compensation benefits. We contrast the use of differences-in-differences estimation, where a comparison is made between a group affected by the policy change and a control group, with instrumental variables estimation when political variables are used as instruments. Although conclusions drawn must be confined to the example at hand, we believe that the analysis illustrates why it may be important to consider the implications of policy endogeneity more generally.

Abstract:
This paper explores the logic of &scal restraints in a political agency model with both moral hazard and adverse selection. The role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters'interests. We use the model to examine the optimality of ine¢ cient taxation, limits on the size of government, increasing trans- parency, and yardstick competition. Some conclusions are surprising. For example, we show that some forms of &scal restraint can only be desirable when incumbents are su¢ ciently likely to be benevolent. We are grateful to Jim Hines and a number of seminar participants for insightful comments. 1

Abstract:
A common feature of federal systems is that tax bases are joint property. Consequently, state and federal tax setting decisions are interdependent. Our aim here is to put forward a rudimentary theoretical analysis of this phenomenon, and to use the theory as a framework for econometrically estimating the magnitude of the responses. We find that when the federal government increases taxes, there is a significant positive response of state taxes. For example, a 10-cent per gallon increase in the federal tax rate on gasoline leads to a 3.2-cent increase in the state tax rate.

Abstract:
Economists who believe that government is essentially benevolent tend to regard inter-governmental competition as a source of negative externalities that lower welfare. In contrast the public choice perspective, particularly that motivated by the Leviathan model, sees such competition as potentially beneficial. This Paper considers a world consisting of politicians of both kinds - self-interested and welfare maximizing. Imperfect information prevents identification of the latter. We model the political equilibrium of the model and then examine the consequences of introducing competition for mobile resources or yardstick competition. In both cases there is a trade-off between effects on politician discipline and selection. Contrary to the existing view, we show that competition is most likely to be welfare improving for voters when it is more likely that politicians are benevolent and bad for welfare when it is most likely that politicians are of the rent seeking type.

Abstract:
We report on an on-going project, which asks a number of questions relevant to the study of state capacity. What are the main economic and political determinants of the state's capacity to raise revenue and support private markets? How do risks of violent conflict affect the incentives to invest in state building? Does it matter whether conflicts are external or internal to the state? When are large states associated with higher income levels and growth rates than small states? What relations should we expect between resource rents, civil wars and economic development? The paper is organized into three main sections: 1. The origins of state capacity, 2. Sate capacity and the genius of taxation, and 3. State capacity and the strategy of conflict. Each of these begins with a specific motivation. A simple model is formulated to analyze the determinants of state capacity in the first section, and modified to address the new issues that arise in subsequent sections. The theoretical results are summarized in a number of propositions. We discuss the implications of the theory, comment on its relation to existing literature, and briefly mention some empiric applications.

development, state capacity

Abstract:
We report on an on-going project, which asks a number of questions relevant to the study of state capacity. What are the main economic and political determinants of the state's capacity to raise revenue and support private markets? How do risks of violent conflict affect the incentives to invest in state building? Does it matter whether conflicts are external or internal to the state? When are large states associated with higher income levels and growth rates than small states? What relations should we expect between resource rents, civil wars and economic development? The paper is organized into three main sections: 1. The origins of state capacity, 2. Sate capacity and the genius of taxation, and 3. State capacity and the strategy of conflict. Each of these begins with a specific motivation. A simple model is formulated to analyze the determinants of state capacity in the first section, and modified to address the new issues that arise in subsequent sections. The theoretical results are summarized in a number of propositions. We discuss the implications of the theory, comment on its relation to existing literature, and briefly mention some empiric applications.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
The aim of the New Political Economy is to understand important issues that arise in the policy sphere. It is not, as is occasionally hinted, an effort by economists to colonize political science. Rather, the main concern is to extend the competence of economists to analyze issues that require some facility with economic and political decision making. At the margin, the New Political Economy reverses the split that occurred between the disciplines of economics and political science at the end of the nineteenth century. This article is not a survey of the field. It is a selective and personal view of some of the themes in the literature. It is framed more as a manifesto presented in the hope that somebody who encounters these ideas for the first time here might be tempted to delve further into the literature and even contribute to it.

Abstract:
The U.K.'s experience with the poll tax reminds us that even in an economy with a relatively well developed detection and legal system, one cannot take tax compliance for granted. The experience of the poll tax provides a unique opportunity to study many dimensions of tax compliance. We model nonpayment rates in a short panel of data on the 366 English local authorities. The transparent observability of individual and aggregate liabilities makes reliable measurement of rates of nonpayment possible. Moreover, these rates rose to unprecedented levels as well as exhibiting considerable variation across authorities. This, together with the variation in local taxes both between districts and over time, creates an ideal opportunity for empirical investigation. Our empirical specification allows us to investigate the determinants of compliance as a function of authority characteristics from census and other geographical data. Moreover, the analysis takes seriously the possibility of neighbourhood influences across authority boundaries. Our empirical results confirm the idea that higher taxes lead to larger compliance problems and that attempts to enforce compliance have a positive effect. Neighbourhood effects on non-compliance were less conspicuous, figuring significantly, if at all, only in the final year.

Abstract:

Abstract:
This paper studies determinants of MPs expense claims in Parliament using the data released under the freedom of information act in 2004. Using a multiple regression framework, we correlate expenses with three sets of variables: constituency characteristics, party affiliation and individual characteristics. We also look at the ratio of parliamentary expenses claimed to votes cast in parliament as a crude measure of value for money. We use the results to reflect on two views of the motivation of MPs, the public Choice view and the public service view.

Abstract:
This chapter develops a unified analytical framework, drawing on and extending the existing literature on the subject, for studying the role of property rights in economic development. It addresses two fundamental and related questions concerning the relationship between property rights and economic activity. (i) What are the mechanisms through which property rights affect economic activity? (ii) What are the determinants of property rights? In answering these, it surveys some of the main empirical and theoretical ideas from the extensive literature on the topic.

This paper will form a chapter for Volume V of the Handbook of Development Economics edited by Dani Rodrik and Mark Rosenzweig.

Economic Development, Property rights

Abstract:
The paper studies credible information transmission by governments. A group of heterogenous individuals have to make private investment and labour supply decisions while relying on the government for information about investment returns. The government consists of an elected citizen who chooses a redistributive strategy in addition to providing information. We give conditions under which the outcome leads to over- or under-investment in high-return activities and the outcome is Pareto efficient.

Abstract:
This paper explores the consequences of creating and improving property rights so that fixed assets can be used as collateral. This has become a cause célèbre of Hernando de Soto whose views are influential in debates about policy reform concerning property rights. Hence, we refer to the economic impact of such reforms as the de Soto effect. We explore the logic of the argument for credit contracts, both in isolation, and in market equilibrium. We show that the impact will vary with the degree of market competition. Where competition is weak, it is possible that borrowers will be worse off when property rights improve. We discuss the implications for optimal policy and the political economy of policy reform.

collateral, credit markets, Hernando de Soto

Abstract:
This paper uses mortgage data to construct a measure of terms on which households access to external finance, and relates it to consumption at both the aggregate and cohort levels. The Household External Finance (HEF) index is based on the spread paid by risky borrowers in the mortgage market. There is evidence that the terms of access to external finance matter more for the consumption of young cohorts in U.K. data. Results are robust to a wide variety of specifications.

birth cohorts, external finance, household consumption, pseudo panels, terms of access

Abstract:
Improving accountability in public services has been a central objective of many public sector reforms in recent years. Chief among these have been efforts to generate observable performance measures as a basis for monitoring performance. This paper examines a natural experiment in regimes applied to waiting list targets for hospital admissions in England and Wales. Prior to 2001, each country had similar policies, organisational structures for hospital care, and levels of resources. After 2001, the principal difference between the countries were the consequences for hospitals that failed to meet targets for waiting times: in England, failure resulted in sanctions in a process of 'naming and shaming', but in Wales, failure was perceived to result in extra resources. We use hospitals in Wales as a 'control group', to examine the effect of 'naming and shaming' in England. We found that this policy did indeed reduce waiting times in England as compared with Wales. However, there is some evidence there was in England, initially, some shuffling of prospective patients to meet specific targets which increased mean waiting times.

hospital waiting times, targets

Abstract:
Almost every major episode of economic change over the past 200 years of political history has been associated with key personalities coming to power with a commitment to these changes. But if such dynamic leaders are so important, then we need to understand how they come to hold the reins of power. This outcome could be viewed as largely the product of random events colored by idiosyncratic personalities and chance encounters. However, at least some role must be given to the underlying institutional structure, which has a more systematic influence on who rises to the top. Thus, it is essential to understand how political selection works.

Abstract:
This paper investigates whether the industrial relations climate in Indian states has affected the pattern of manufacturing growth in the period 1958-1992. We show that states which amended the Industrial Disputes Act in a pro-worker direction experienced lowered output, employment, investment, and productivity in registered or formal manufacturing. In contrast, output in unregistered or informal manufacturing increased. Regulating in a pro-worker direction was also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labor can end up hurting the poor.

Abstract:
Since farmers in developing countries must make sunk investments to produce perennial crops, governments, in the guise of state-run marketing boards, face constraints on maximal sustainable price which can be charged by a marketing board assuming that "punishments" involve reversion to subsistence by untrusting farmers. This maximal price balances concerns about revenue extraction against the incentive of governments to cheat by capitalizing on sunk investments.

Abstract:
This paper develops an approach to the study of democratic policy-making where politicians are selected by the people from those citizens who present themselves as candidates for public office. The approach has a number of attractive features. First, it is a conceptualization of a pure form of representative democracy in which government is by, as well as of, the people. Second, the model is analytically tractable, being able to handle multidimensional issue and policy spaces very naturally. Third, it provides a vehicle for answering normative questions about the performance of representative democracy.