The Relevance of the Principal-Agent Model for the Analysis of Public Policies : Do the Objectives Conflict ?

This paper aims to provide empirical support for the use of the principal-agent framework in the analysis of public sector and public policies. After reviewing the different conditions to be met for a relevant analysis of the relationship between population and government using the principal-agent theory, our paper focuses on the assumption of conflicting goals between the principal and the agent. A principal-agent analysis assumes in effect that inefficiencies may arise because principal and agent pursue different goals. Using data collected during an amalgamation project of two Swiss municipalities, we show the existence of a gap between the goals of the population and those of the government. Consequently, inefficiencies as predicted by the principal-agent model may arise during the implementation of a public policy, i.e. an amalgamation project. In a context of direct democracy where policies are regularly subjected to referendum, the conflict of objectives may even lead to a total failure of the policy at the polls.

Waste management policies for industrial symbiosis development: case studies in European countries

Industrial symbiosis (IS) emerged as a self-organizing business strategy among firms that are willing to cooperate to improve their economic and environmental performance. The adoption of such cooperative strategies relates to increasing costs of waste management, most of which are driven by policy and legislative requirements. Development of IS depends on an enabling context of social, informational, technological, economical and political factors. The power to influence this context varies among the agents involved such as the government, businesses or coordinating entities. Governmental intervention, as manifested through policies, could influence a wider range of factors; and we believe this is an area which is under-researched. This paper aims to critically appraise the waste policy interventions from supra-national to sub-national levels of government. A case study methodology has been applied to four European countries i.e. Denmark, the UK, Portugal and Switzerland, in which IS emerged or is being fostered. The findings suggest that there are commonalities in policy instruments that may have led to an IS enabling context. The paper concludes with lessons learnt and recommendations on shaping the policy context for IS development.

Europeanization or Party Politics? Explaining Government Choice for Corporatist Concertation

This article assesses whether changes in government choice for policy concertation with trade unions and employers are better explained by international or domestic factors. We compare patterns of corporatist governance in a strongly Europeanized policy domain (labor migration policy) and in a weakly Europeanized policy domain (welfare state reforms) over the last 20 years in Austria and Switzerland. We show that there is no systematic difference in patterns of concertation between the two policy sectors and that factors linked to party politics play a bigger role in the choice of governments for concertation. If the base of party support for policies is divided, governments are more prone to resort to corporatist concertation as a way to build compromises for potentially controversial or unpopular policies. By contrast, ideologically cohesive majority coalitions are less prone to resort to concertation because they do not need to build compromises outside their base of party support.

Contextual determinants of alcohol consumption changes and preventive alcohol policies: a 12-country European study in progress.

Beginning with France in the 1950s, alcohol consumption has decreased in Southern European countries with few or no preventive alcohol policy measures being implemented, while alcohol consumption has been increasing in Northern European countries where historically more restrictive alcohol control policies were in place, even though more recently they were loosened. At the same time, Central and Eastern Europe have shown an intermediate behavior. We propose that country-specific changes in alcohol consumption between 1960 and 2008 are explained by a combination of a number of factors: (1) preventive alcohol policies and (2) social, cultural, economic, and demographic determinants. This article describes the methodology of a research study designed to understand the complex interactions that have occurred throughout Europe over the past five decades. These include changes in alcohol consumption, drinking patterns and alcohol-related harm, and the actual determinants of such changes.

Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Street-Level Bureaucracy and E-Government

With the intensive use of information and communication technologies, governments are transforming into e-governments. While public management research has given increased attention to this subject lately, this article reviews the limited literature that deals with the impacts of e-government technologies on street-level bureaucracies. A twofold argument is being developed. First, what can be called the 'curtailment thesis', stressing the reduction or disappearance of frontline policy discretion, is addressed. Second, the 'enablement thesis' gets attention, highlighting how technologies provide frontline workers and citizens with additional action resources. The article concludes with propositions for a future research agenda on the topic.