Trade, justice, and the politics of difference: Small developing states in the World Trade Organization

The purpose of this research project was to investigate two distinct types of research questions – one theoretical, the other empirical: (1) What would justice mean in the context of the international trade regime? (2.Using the small developing states of the Commonwealth Caribbean as a case study, what do Commonwealth Caribbean trade negotiators mean when they appeal to justice? Regarding the first question, Iris Young's framework which focuses on the achievement of social justice in a domestic context by acknowledging social differences such as those based on race and gender, was adopted and its relevance argued in the international context of interstate trade negotiation so as to validate the notion of (size, location, and governance capacity) difference in this latter context. The point of departure is that while states are typically treated as equals in international law – as are individuals in liberal political theory – there are significant differences between states which warrant different treatment in the international arena. The study found that this re-formulation of justice which takes account of such differences between states, allows for more adequate policy responses than those offered by the presumption of equal treatment. Regarding the second question, this theoretical perspective was used to analyze the understandings of justice from which Commonwealth Caribbean trade negotiators proceed. Interpretive and ethnographic methods, including participant observation, interviews, field notes, and textual analysis, were employed to analyze their understandings of justice. The study found that these negotiators perceive such justice as being justice to difference because of the distinct characteristics of small developing states which combine to constrain their participation in the international trading system; based on this perception, they seek rules and outcomes in the multilateral trade regime which are sensitive to such different characteristics; and while these issues were examined in a specific region, its findings are relevant for other regions consisting of small developing states, such as those in the ACP group.

The political economy of sovereign debt

This dissertation examines international lending arrangements between a competitive foreign investor and a less-developed country. Given that the benefits and costs of borrowing are distributed unequally across society, it is of interest to examine the conditions under which borrowing occurs and how the borrowed funds are allocated. Three theoretical models are developed to consider optimal lending arrangements in the presence of sovereign risk. The models show how a society's level and distribution of wealth influences its access to loans and the terms of the loan agreements. Optimal loan contracts are established, which place either a debt ceiling or a debt floor on the amount of the loan that, will be offered. ^

The recruitment process of the Shining Path and MRTA guerrilla groups: A political psychological perspective

This thesis is an analysis of the recruitment process of the Shining Path -SP- and Revolutionary Movement “Túpac Amaru” -MRTA- guerrilla groups. Although SP was considered more aggressive, it gained more followers than MRTA. This thesis tries to explain why. Social Revolution Theory and Social Movement Theory provide explanations based on issues of “poverty”, disregarding the specific characteristics of the guerrilla groups and their supporters, as well as the influence of specific persuasive processes between the leaders of the groups and their followers. Integrative complexity theory, on the contrary, provides a consistent method to analyze cognitive processes: because people tend to reject complex and sophisticated explanations that require mental efforts, simplicity was the key for success. To prove which guerrilla group provided a simpler worldview, a sample of official documents of SP and MRTA are compared. Finally, content analysis is applied through the Paragraph Completion Test (P.C.T.). ^

Political corruption in the Caribbean Basin: A comparative analysis of Jamaica and Costa Rica

Political corruption in the Caribbean Basin retards state economic growth and development, undermines government legitimacy, and threatens state security. In spite of recent anti-corruption efforts of intergovernmental and nongovernmental organizations (IGO/NGOs), Caribbean political corruption problems appear to be worsening in the post-Cold War period. This dissertation discovers why IGO/NGO efforts to arrest corruption are failing by investigating the domestic and international causes of political corruption in the Caribbean. The dissertation's theoretical framework centers on an interdisciplinary model of the causes of political corruption built within the rule-oriented constructivist approach to social science. The model first employs a rational choice analysis that broadly explains the varying levels of political corruption found across the region. The constructivist theory of social rules is then used to develop the structural mechanisms that further explain the region's levels of political corruption. The dissertation advances its theory of the causes of political corruption through qualitative disciplined-configurative case studies of political corruption in Jamaica and Costa Rica. The dissertation finds that IGO/NGO sponsored anti-corruption programs are failing because they employ only technical measures (issuing anti-corruption laws and regulations, providing transparency in accounting procedures, improving freedom of the press, establishing electoral reforms, etc.). While these IGO/NGO technical measures are necessary, they are not sufficient to arrest the Caribbean's political corruption problems. This dissertation concludes that to be successful, IGO/NGO anti-corruption programs must also include social measures, e.g., building civil societies and modernizing political cultures, for there to be any hope of lowering political corruption levels and improving Caribbean social conditions. The dissertation also highlights the key role of Caribbean governing elite in constructing the political and economic structures that cause their states' political corruption problems. ^

The multiple dimensions of political trust in democratic Argentina

Why do Argentines continue to support democracy despite distrusting political institutions and politicians? Support for democracy is high even though performance of the regime is poor. One would suspect that poor economic and political performance would open the door for military intervention given the history of Argentina. What changed? What explains variance across the multiple dimensions of political trust, such as trust in the regime, trust in political institutions, and trust in politicians? This dissertation is a case study of political culture through public opinion exploring the multiple dimensions of political trust in Argentina during the 1990s. ^ Variance across the different dimensions of political trust may be an indicator of the rise of a new type of citizens called "critical citizens." Critical citizens are citizens who criticize the regime to obtain democratic reforms but support the ideals of democracy. In established democracies, the rise of critical citizens is explained by a shift in individuals' value priorities towards postmaterialism. Postmaterialism is a cultural change in the direction of values that emphasize self-realization and individual well-being. Postmaterialism influences various social and political attitudes. ^ Because Argentina is experiencing a cultural change and a rise of critical citizens similar to more advanced societies, the theory of postmaterialism generated the main hypothesis to explain the multiple dimensions of political trust. This dissertation also tested an alternative explanation: the multiple dimensions of political trust responded instead to citizens' evaluations of performance. Ultimately, postmaterialism explained trust in the political regime and trust in the political institutions. Contrary to expectations, postmaterialism did not explain trust in the political elites or politicians. Trust in politicians was better explained by the alternative hypothesis, performance. ^ The main method of research was the statistical method supplemented with the comparative method when data were available. Two main databases were used: the World Values Surveys and the Latinobarometer. ^

The political economy of inequality and growth: Essays on sovereign debt, democracy and saving

This dissertation addresses three issues in the political economy of growth literature. The first study empirically tests the hypothesis that income inequality influences the size of a country's sovereign debt for a sample of developing countries for the period 1970–1990. The argument examined is that governments tend to yield to popular pressures to engage in redistributive policies, partially financed by foreign borrowing. Facing increased risk of default, international creditors limit the credit they extend, with the result that borrowing countries invest less and grow at a slower pace. The findings do not seem to support the negative relationship between inequality and sovereign debt, as there is evidence of increases in multilateral, countercyclical flows until the mid 1980s in Latin America. The hypothesis would hold for the period 1983–1990. Debt flows and levels seem to be positively correlated with growth as expected. ^ The second study empirically investigates the hypothesis that pronounced levels of inequality lead to unconsolidated democracies. We test the existence of a nonmonotonic relationship between inequality and democracy for a sample of Latin American countries for the period 1970–2000, where democracy appears to consolidate at some intermediate level of inequality. We find that the nonmonotonic relationship holds using instrumental variables methods. Bolivia seems to be a case of unconsolidated democracy. The positive relationship between per capita income and democracy disappears once fixed effects are introduced. ^ The third study explores the nonlinear relationship between per capita income and private saving levels in Latin America. Several estimation methods are presented; however, only the estimation of a dynamic specification through a state-of-the-art general method of moments estimator yields consistent estimates with increased efficiency. Results support the hypothesis that income positively affects private saving, while system GMM reveals nonlinear effects at income levels that exceed the ones included in this sample for the period 1960–1994. We also find that growth, government dissaving, and tightening of credit constraints have a highly significant and positive effect on private saving. ^

Essays on political economy

The first chapter analizes conditional assistance programs. They generate conflicting relationships between international financial institutions (IFIs) and member countries. The experience of IFIs with conditionality in the 1990s led them to allow countries more latitude in the design of their reform programs. A reformist government does not need conditionality and it is useless if it does not want to reform. A government that faces opposition may use conditionality and the help of pro-reform lobbies as a lever to counteract anti-reform groups and succeed in implementing reforms.^ The second chapter analizes economies saddled with taxes and regulations. I consider an economy in which many taxes, subsidies, and other distortionary restrictions are in place simultaneously. If I start from an inefficient laissez-faire equilibrium because of some domestic distortion, a small trade tax or subsidy can yield a first-order welfare improvement, even if the instrument itself creates distortions of its own. This may result in "welfare paradoxes". The purpose of the chapter is to quantify the welfare effects of changes in tax rates in a small open economy. I conduct the simulation in the context of an intertemporal utility maximization framework. I apply numerical methods to the model developed by Karayalcin. I introduce changes in the tax rates and quantify both the impact on welfare, consumption and foreign assets, and the path to the new steady-state values.^ The third chapter studies the role of stock markets and adjustment costs in the international transmission of supply shocks. The analysis of the transmission of a positive supply shock that originates in one of the countries shows that on impact the shock leads to an inmediate stock market boom enjoying the technological advance, while the other country suffers from depress stock market prices as demand for its equity declines. A period of adjustment begins culminating in a steady state capital and output level that is identical to the one before the shock. The the capital stock of one country undergoes a non-monotonic adjustment. The model is tested with plausible values of the variables and the numeric results confirm the predictions of the theory.^

Essays on the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

Essays On Political Economy

The first chapter analizes conditional assistance programs. They generate conflicting relationships between international financial institutions (IFIs) and member countries. The experience of IFIs with conditionality in the 1990s led them to allow countries more latitude in the design of their reform programs. A reformist government does not need conditionality and it is useless if it does not want to reform. A government that faces opposition may use conditionality and the help of pro-reform lobbies as a lever to counteract anti-reform groups and succeed in implementing reforms. The second chapter analizes economies saddled with taxes and regulations. I consider an economy in which many taxes, subsidies, and other distortionary restrictions are in place simultaneously. If I start from an inefficient laissez-faire equilibrium because of some domestic distortion, a small trade tax or subsidy can yield a first-order welfare improvement, even if the instrument itself creates distortions of its own. This may result in "welfare paradoxes". The purpose of the chapter is to quantify the welfare effects of changes in tax rates in a small open economy. I conduct the simulation in the context of an intertemporal utility maximization framework. I apply numerical methods to the model developed by Karayalcin. I introduce changes in the tax rates and quantify both the impact on welfare, consumption and foreign assets, and the path to the new steady-state values. The third chapter studies the role of stock markets and adjustment costs in the international transmission of supply shocks. The analysis of the transmission of a positive supply shock that originates in one of the countries shows that on impact the shock leads to an inmediate stock market boom enjoying the technological advance, while the other country suffers from depress stock market prices as demand for its equity declines. A period of adjustment begins culminating in a steady state capital and output level that is identical to the one before the shock. The the capital stock of one country undergoes a non-monotonic adjustment. The model is tested with plausible values of the variables and the numeric results confirm the predictions of the theory.