Political centralization and government accountability

This paper studies fiscal federalism when regions differ in voters' ability to monitor publicofficials. We develop a model of political agency in which rent-seeking politicians providepublic goods to win support from heterogeneously informed voters. In equilibrium, voterinformation increases government accountability but displays decreasing returns. Therefore,political centralization reduces aggregate rent extraction when voter information varies acrossregions. It increases welfare as long as the central government is required to provide publicgoods uniformly across regions. The need for uniformity implies an endogenous trade off between reducing rents through centralization and matching idiosyncratic preferences throughdecentralization. We find that a federal structure with overlapping levels of government canbe optimal only if regional differences in accountability are sufficiently large. The modelpredicts that less informed regions should reap greater benefits when the central governmentsets a uniform policy. Consistent with our theory, we present empirical evidence that lessinformed states enjoyed faster declines in pollution after the 1970 Clean Air Act centralizedenvironmental policy at the federal level.

Political economy of preferential trade agreement: the case of bilateral asymmetric negotiation

The purpose of this paper is to analyse the political economy of preferential trade agreements based on a sequential non-cooperative Stackelberg political game between a large economy and a small one, in which the political dispute of rival lobby groups defines the unilateral stance of both governments in the first stage; and the Stackelberg "coalition-proof" equilibrium defines the free trade agreement format in the second stage. Finally, a few modifications in the initial game structure are discussed in order to enhance the small economy's negotiation power. The political economy model is applied to FTAA case.

Soft budget constraints in a dynamic general equilibrium model

This paper considers an overlapping generations model in which capital investment is financed in a credit market with adverse selection. Lenders’ inability to commit ex-ante not to bailout ex-post, together with a wealthy position of entrepreneurs gives rise to the soft budget constraint syndrome, i.e. the absence of liquidation of poor performing firms on a regular basis. This problem arises endogenously as a result of the interaction between the economic behavior of agents, without relying on political economy explanations. We found the problem more binding along the business cycle, providing an explanation to creditors leniency during booms in some LatinAmerican countries in the late seventies and early nineties.

Human capital and growth under political uncertainty

In this paper we show how political uncertainty may impede economic growth by reducing public investment in the formation of human capital, and how this negative effect of political uncertainty can be offset by a government contract. We present a model of growth with accumulation of human capital and government investment in education. We show that in a country with an unstable political system the government is reluctant to invest in human capital. Low government spending on education negatively affects productivity and slows growth. Furthermore, a politically unstable economy may be trapped in a stagnant equilibrium. We also demonstrate the role of a government retirement contract. Public investment in education and economic growth are higher when the future retirement compensation of the government depends on the future national income, in comparison with investment under zero or fixed retirement compensation.

The political economy of exchange rate in Brazil

This paper reviews part of the political economy literature on exchange rate policy relevant to understanding the political motivations behind the Brazilian exchange rate policy. We shall first examine the distributive role of the exchange rate, and the way it unfolds in terms of the desired political goals. We will follow by analyzing exchange policy as indicative of government effciency prior to elections. Finally, we discuss fiscal policy from the point of view of political economy, in which the exchange rate results from the macroeconomic equilibrium. Over this review, the Brazilian exchange rate policy is discussed in light of the theories presented.

Signaling in political budget cycles: How far are you willing to go?

This paper analyzes how heterogeneity in two dimensions, competency and character, a¤ects political budget cycles. Competency is the e¢ciency in running the government. Character is the degree of opportunism. In this expanded space, previous results in the literature on the separating nature of the signaling equilibrium hold if heterogeneity in opportunism is low. With high heterogeneity in opportunism, no separating equilibrium exists. Rather, the equilibrium is partially pooling: only extreme types can be distinguished.

Asset accumulation by the middle class and the poor in Latin America: political economy and governance dimensions

Includes bibliography

A mixed methods inquiry into the political economy of agriculture and rural areas in Lebanon

The present work, then, is concerned with the forgotten elements of the Lebanese economy, agriculture and rural development. It investigates the main problematic which arose from these forgotten components, in particular the structure of the agricultural sector, production technology, income distribution, poverty, food security, territorial development and local livelihood strategies. It will do so using quantitative Computable General Equilibrium (CGE) modeling and a qualitative phenomenological case study analysis, both embedded in a critical review of the historical development of the political economy of Lebanon, and a structural analysis of its economy. The research shows that under-development in Lebanese rural areas is not due to lack of resources, but rather is the consequence of political choices. It further suggests that agriculture – in both its mainstream conventional and its innovative locally initiated forms of production – still represents important potential for inducing economic growth and development. In order to do so, Lebanon has to take full advantage of its human and territorial capital, by developing a rural development strategy based on two parallel sets of actions: one directed toward the support of local rural development initiatives, and the other directed toward intensive form of production. In addition to its economic returns, such a strategy would promote social and political stability.

The role of Central Europe in the German economy. The political consequences. OSW Report June 2016

Recent publications allow us to conclude that the economic relations between Germany and Central Europe have come to the ‘end of history’, and nothing new will happen. However, a deeper analysis of these relationships reveals interesting new trends. Since joining the European Union the states of Central Europe have not settled for maintaining the average level of economic development, but have continued to narrow the distance between them and Western Europe, something which the global financial crisis did not prevent. Their improved economic situation also affected their relations with Germany. The latest results from the Visegrád Group states show them to be Germany’s most important trading partner, and their balance of trade in goods is in a state of equilibrium, while many euro area countries have recorded high trade deficits with Germany. The aim of this report is to display the trends in trade and investment between Germany and Central Europe, based on the example of the Visegrád Group. The author will also attempt to answer the question of whether the advancing economic cooperation between Germany and the V4 countries will lead to the further modernisation of those countries’ economies, or whether it will run the risk of leaving them in the ‘middle income trap’.

From Anti-equilibrium to The Socialist System and Beyond

This essay attempts to understand János Kornai’s works from a political economy perspective. It argues that Kornai has significantly contributed to the formation of a new paradigm of political economy. The main endeavor of Kornai has been the combination of analytical concepts of economics with the empirical description of real economies. After a certain period of theoretical experimentation János Kornai formulated his research program that can be called the shortage economy explanation of the socialist system. The Economics of Shortage and The Socialist System have created a new theoretical paradigm in a framework in which it has become possible to establish a connection between the analytical and empirical, universal and historical aspects of the theory studying the socialist system as a real economic entity. János Kornai has built his analysis of the socialist system on the primary role of politics in the creation of economic institutions. In his present work on capitalism he has extended this thesis to the capitalist system. This seems to be an important contribution of his to a new political economy paradigm that is just in the process of formation.

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 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.

Foreign Direct Investment and Political Uncertainty

Recent developments in the general equilibrium theory of multinationals emphasize the importance of multilateral considerations. Yet, existing explanations and corresponding estimations of FDI patterns have largely limited political and institutional investment impediments to a bilateral framework. Through the application of spatial econometric techniques, I demonstrate that the presence of both domestic and regional political uncertainty generate real options effects that lead to the delay or redirection of foreign direct investment. The magnitude and direction of these effects is conditional upon the host country regime type and the predominant multinational integration strategies in the region. Comparing these results with FDI of U.S. origin, I find evidence for divergent investment behavior by U.S. multinationals during regime changes in partner countries. Additionally, I find no evidence that multinationals from developing countries are more likely to complete cross-border deals in environments characterized by greater political risk or political uncertainty.

Cidadania e educação física : matrizes históricas e políticas, contradições e perspectivas = Citizenship and physical education : historical and political matrices, perspectives and contradictions

Universidade Estadual de Campinas . Faculdade de Educação Física

Rumor Propagation Model: An Equilibrium Study

Compartmental epidemiological models have been developed since the 1920s and successfully applied to study the propagation of infectious diseases. Besides, due to their structure, in the 1960s an interesting version of these models was developed to clarify some aspects of rumor propagation, considering that spreading an infectious disease or disseminating information is analogous phenomena. Here, in an analogy with the SIR (Susceptible-Infected-Removed) epidemiological model, the ISS (Ignorant-Spreader-Stifler) rumor spreading model is studied. By using concepts from the Dynamical Systems Theory, stability of equilibrium points is established, according to propagation parameters and initial conditions. Some numerical experiments are conducted in order to validate the model.