The Political Economy of Resource Rent Distribution

I model the link between political regime and level of diversification following a windfall of natural resource revenues. The explanatory variables I make use of are the political support functions embedded within each type of regime and the disparate levels of discretion, openness, transparency, and accountability of government. I show that a democratic government seeks to maximize the long-term consumption path of the representative consumer, in order to maximize its chances of re-election, while an authoritarian government, in the absence of any electoral mechanism of accountability, seeks to buy off and entrench a group of special interests loyal to the government and potent enough to ensure its short-term survival. Essentially the contrast in the approaches towards resource rent distribution comes down to a variation in political weights on aggregate welfare and rentierist special interests endogenized by distinct political support functions.

The "New Political Economy": Two Recent Books

This paper reviews two recent books on Political Economy by Allan Drazen and Torsten Persson and Guido Tabellini. It discusses some problems of the recent Political Economy literature.

The 'new political economy': Two recent books

This paper reviews two recent books on Political Economy by Allan Drazen and Torsten Persson and Guido Tabellini. It discusses some problems of the recent Political Economy literature.

The survival of the welfare state

This paper provides an analytical characterization of Markov perfectequilibria in a politico-economic model with repeated voting, whereagents vote over distortionary income redistribution. The key featureof the theory is that the future constituency of redistributive policiesdepends positively on the current level of redistribution, since thisaffects both private investments and the future distribution of voters.Agents vote rationally and fullly anticipate the effects of their politicalchoice on both private incentives and future voting outcomes. The modelfeatures multiple equilibria. In "pro-welfare" equilibria, both welfarestate policies and their effects on distribution persist forever. In"anti-welfare equilibria", even a majority of beneficiaries ofredistributive policies vote strategically so as to induce the formationof a future majority that will vote for zero redistribution.

The political economy of employment protection

This paper develops a model of job creation and job destruction in agrowing economy with embodied technical progress, that we use toanalyze the political support for employment protection legislationssuch as the ones that are observed in most European countries.We analyze the possibility of Condorcet cycles due to the fact thatworkers about to become unemployed prefer both an increase and areduction in firing costs over the status quo. Despite this problem, we show the existence of local, and sometimes global majority winners.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer job duration. We show that the gains from, and consequently the politicalsupport for employment protection (as defined by maximunjob tenure) are larger, the lower the rate of creative destruction and the largerthe worker's bargaining power. Numerical simulations suggest a hump-shaped response of firing costs to these variables, as well as negative impact of exogeneous turnover on employment protection.

A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900)

[spa] El estudio de los procesos a través de los cuales la economía política se ha transformado en una disciplina académica es un área de creciente interés en la historia del pensamiento económico. Dicho estudio se ha abordado a través del análisis de la importancia de la economía política en un conjunto de instituciones, consideradas clave en la expansión de la economía en las sociedades occidentales en la segunda mitad del siglo XIX y primeras décadas del XX: universidades, sociedades económicas, publicaciones periódicas de contenido económico y los parlamentos nacionales. Este papel presenta una comparación entre los desarrollos del proceso de institutionalización de la economía política en España e Italia, a través del estudio de la presencia de esta disciplina en las instituciones mencionadas para el periodo 1860-1900. El objetivo es medir la posible existencia de una vía común en la institucionalización de la economía política en ambos países, como un primer paso hacia la elaboración de un modelo supranacional de institucionalización de la economía en este periodo.

Political economy of municipal water service privatization in Spain: a duration model analysis

This empirical work applies a duration model to the study of factors determining privatization of local water services. I assess how factors determining privatization decision evolve as time goes by. A sample of 133 Spanish municipalities during the six terms of office taken place during the 1980-2002 period is analyzed. A dynamic neighboring effect is hypothesized and successfully tested. In a first stage, private water supply firms may try to expand to regions where there is no service privatized, in order to spread over this region after having being installed thanks to its scale advantages. Other factors influencing privatization decision evolve during the two decades under study, from the priority to fix old infrastructures to the concern about service efficiency. Some complementary results regarding political and budgetary factors are also obtained

A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900)

[spa] El estudio de los procesos a través de los cuales la economía política se ha transformado en una disciplina académica es un área de creciente interés en la historia del pensamiento económico. Dicho estudio se ha abordado a través del análisis de la importancia de la economía política en un conjunto de instituciones, consideradas clave en la expansión de la economía en las sociedades occidentales en la segunda mitad del siglo XIX y primeras décadas del XX: universidades, sociedades económicas, publicaciones periódicas de contenido económico y los parlamentos nacionales. Este papel presenta una comparación entre los desarrollos del proceso de institutionalización de la economía política en España e Italia, a través del estudio de la presencia de esta disciplina en las instituciones mencionadas para el periodo 1860-1900. El objetivo es medir la posible existencia de una vía común en la institucionalización de la economía política en ambos países, como un primer paso hacia la elaboración de un modelo supranacional de institucionalización de la economía en este periodo.

Shrouded costs of government: The political economy of state and local public pensions

Why do public-sector workers receive so much of their compensation in the formof pensions and other benefits? This paper presents a political economy model inwhich politicians compete for taxpayers' and government employees' votes by promising compensation packages, but some voters cannot evaluate every aspect of promisedcompensation. If pension packages are "shrouded", so that public-sector workers better understand their value than ordinary taxpayers, then compensation will be highlyback-loaded. In equilibrium, the welfare of public-sector workers could be improved,holding total public-sector costs constant, if they received higher wages and lowerpensions. Centralizing pension determination has two offsetting effects on generosity:more state-level media attention helps taxpayers better understand pension costs, andthat reduces pension generosity; but a larger share of public-sector workers will votewithin the jurisdiction, which increases pension generosity. A short discussion of pensions in two decentralized states (California and Pennsylvania) and two centralizedstates (Massachusetts and Ohio) suggests that centralization appears to have modestlyreduced pensions, but, as the model suggests, this is unlikely to be universal.

From urban political economy to the cultural political economy : rethinking culture and economy in and beyond the urban

Discussions about the culture-economy articulation have occurred largely within theconfines of economic geography. In addition, much attention has been diverted intocaricaturized discussions over the demise of political economy or the invalidity ofculturalist arguments. Moving the argument from the inquiry on the ¿nature¿ of theeconomy itself to the transformation of the role of culture and economy inunderstanding the production of the urban form from an urban political economy (UPE)this paper focuses on how the challenges posed by the cultural turn have enabled urbanpolitical economy to participate constructively in interdisciplinary efforts to reorientpolitical economy in the direction of a critical cultural political economy.

Assessing the Political Viability of Labour Market Reform: The Case of Employment Protection

We analyze the political support for employment protection legislation. Unlike my previous work on the same topic, this paper pays a lot of attention to the role of obsolescence in the growth process. In voting in favour of employment protection, incumbent employees trade off lower living standards (because employment protection maintains workers in less productive activities) against longer job duration. The support for employment protection will then depend on the value of the latter relative to the cost of the former. We highlight two key deeterminants of this trade-off: first, the workers' bargaining power, second, the economy's growth rate-more precisely its rate of creative destruction.

What social security: Beveridgean or Bismarckian?

Why are Bismarckian social security systems associated with largerpublic pension expenditures, a smaller fraction of private pension andlower income in-equality than Beveridgean systems? These facts arepuzzling for political economy theories of social security whichpredict that Beveridgean systems, involving intra-generationalredistribution, should enjoy larger support among low-income people andthus be larger. This paper explains these features in a bidimensionalpolitical economy model. In an economy with three income groups,low-income support a large, redistributive system; middle-income favoran earning-related system, while high-income oppose any public system,since they have access to a superior saving technology, a privatesystem. We show that, if income inequality is large, the voting majorityof high-income and low-income supports a (small) Beveridgean system,and a large private pillar arises; the opposite occurs with lowinequality. Additionally, when the capital market provides higherreturns, a Beveridgean system is more likely to emerge.

Assesing the political viability of labour market reform: The case of employment protection

We analyze the political support for employment protection legislation.Unlike my previous work on the same topic, this paper pays a lot ofattention to the role of obsolescence in the growth process.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer jobduration. The support for employment protection will then depend onthe value of the latter relative to the cost of the former. Wehighlight two key deeterminants of this trade-off: first, the workers'bargaining power, second, the economy's growth rate-more preciselyits rate of creative destruction.