Rules vs. political discretion: evidence from constitutionally guaranteed transfers to local governments in Brazil

Can rules be used to shield public resources from political interference? The Brazilian constitution and national tax code stipulate that revenue sharing transfers to municipal governments be determined by the size of counties in terms of estimated population. In this paper I document that the population estimates which went into the transfer allocation formula for the year 1991 were manipulated, resulting in significant transfer differentials over the entire 1990's. I test whether conditional on county characteristics that might account for the manipulation, center-local party alignment, party popularity and the extent of interparty fragmentation at the county level are correlated with estimated populations in 1991. Results suggest that revenue sharing transfers were targeted at right-wing national deputies in electorally fragmented counties as well as aligned local executives.

Strategic ambiguity in electoral competition

Many have observed that political candidates running for election areoften purposefully expressing themselves in vague and ambiguous terms. In thispaper we provide a simple formal model of this phenomenon. We model theelectoral competition between two candidates as a two--stage game. In thefirst stage of the game two candidates simultaneously choose their ideologies,and in the second stage they simultaneously choose their level of ambiguity.Our results show that ambiguity, although disliked by voters, may be sustainedin equilibrium. The introduction of ambiguity as a strategic choice variablefor the candidates can also serve to explain why candidates with the sameelectoral objectives end up ``separating'', that is, assuming different ideological positions.

Alleged Tax Competition: The Mysterious Death of Inheritance Taxes in Switzerland

Interjurisdictional competition over mobile tax bases is an easily understood mechanism, but actual tax-base elasticities are difficult to estimate. Political pressure for reducing tax rates could therefore be based on erroneous estimates of the mobility of tax bases. We show that tax competition provided the overwhelmingly dominant argument in the policy debates leading to a succession of reforms of bequest taxation by Swiss cantons. Yet, we find only very weak statistical evidence of a relationship between tax burdens on bequests and the concerned tax base of wealthy elderly individuals. Moreover, inheritance tax revenues are found to increase in inheritance tax rates even in the long run, and actual tax rates lie well below the revenue-maximising levels throughout. The alleged pressures of tax competition did not seem in reality to exist.

Political market and regulatory uncertainty: Insights and implications for integrated strategy

Managers can craft effective integrated strategy by properly assessing regulatory uncertainty. Leveraging the existing political markets literature, we predict regulatory uncertainty from the novel interaction of demand and supply side rivalries across a range of political markets. We argue for two primary drivers of regulatory uncertainty: ideology-motivated interests opposed to the firm and a lack of competition for power among political actors supplying public policy. We align three, previously disparate dimensions of nonmarket strategy - profile level, coalition breadth, and pivotal target - to levels of regulatory uncertainty. Through this framework, we demonstrate how and when firms employ different nonmarket strategies. To illustrate variation in nonmarket strategy across levels of regulatory uncertainty, we analyze several market entry decisions of foreign firms operating in the global telecommunications sector.

The inequality curse: constraints and political discretion

We live in an unjust world characterized by economic inequality. No liberal theory of justice is able to justify it. Inequality is not “solved” with equality of opportunity or meritocracy. Nor by the socialist and republican critique. The poor will have to count with them and with democracy to make social progress reality. In their political struggle, they will face one economic constraint: the expected profit rate must remain attractive to business investors. Yet, giving that technological progress in increasingly capital-saving, this economic constraint does not obstruct that wages grow above the productivity rate and inequality is reduced. What really is an obstacle to social justice in the rich countries is, on one hand, the power that capitalist rentiers retain and financists acquired, and, on the other, the competition originated in low wage countries.

Accountability and yardstick competition in the public provision of education

This paper explores the institutional change introduced by the public disclosure of an education development index (IDEB, Basic Education Development Index) in 2007 to identify the e ect of education accountability on yardstick competition in education spending for Brazilian municipalities. Our results are threefold. First, political incentives are pervasive in setting the education expenditures. The spatial strategic behavior on education spending is estimated lower for lame-ducks and for those incumbents with majority support at the city council. This suggests a strong relation between commitment and accountability which reinforces yardstick competition theory. Second, we nd a minor reduction (20%) in spatial interaction for public education spending after IDEB's disclosure | compared to the spatial correlation before the disclosure of the index. This suggests that public release of information may decrease the importance of the neighbors` counterpart information on voter`s decision. Third, exploring the discontinuity of IDEB`s disclosure rule around the cut-o of 30 students enrolled in the grade under assessment, our estimates suggest that the spatial autocorrelation | and hence yardstick competition | is reduced in 54%. Finally, an unforeseen result suggests that the disclosure of IDEB increases expenditures, more than 100% according to our estimates.

Betting on winner: the effect of local elections on corporate political activity outcomes

How can managers successfully access political rents by way of corporate political strategies (CPA)? Existing research has suggested several endogenous factors that correlate with CPA outcomes. I offer a more robust solution to this problem. Drawing on insights from the perspective of CPA as exchanges between firms and political decision-makers, and from the special interest politics of political economy, I develop and test a causal mechanism that links local elections, legislative bargaining and access to political rents at the national level. I conducted a natural experiment using regression discontinuity design and propensity score matching in municipal elections in Brazil to show that firms enjoy superior access to subsidized financing from the state-owned national development bank (BNDES) when they decide to invest in municipalities whose winning mayoral candidate is coalition-aligned with the national ruler. This effect fades away fades away as the level of competition in the local election decreases. The evidence implies that when managers bet on national coalition-aligned winners in close local elections, they positively affect CPA outcomes. I extend the exchange-based typology of corporate political strategies by offering a novel possibility of targeting voters with financial inducements, which I call a private local development strategy. Finally, these results show that firms exchange their project-execution capabilities for superior access to subsidized financing.

Spatial spillovers and political coordination in public health provision

We estimate the impact of the main unconditional federal grant (Fundo de Participaçãodos Municípios - FPM) to Brazilian municipalities as well as its spillover from the neighboring cities on local health outcomes. We consider data from 2002 to 2007 (Brollo et al, 2013) and explore the FPM distribution rule according to population brackets to apply a fuzzy Regression Discontinuity Design (RDD) using cities near the thresholds. In elasticity terms, we nd a reduction on infant mortality rate (-0.18) and on morbidity rate (- 0.41), except in the largest cities of our sample. We also nd an increase on the access to the main program of visiting the vulnerable families, the Family Health Program (Programa Sa ude da Família - PSF). The e ects are stronger for the smallest cities of our sample and we nd increase: (i) On the percentage of residents enrolled in the program (0.36), (ii) On the per capita number of PSF visits (1.59), and (iii) On the per capita number of PSF visits with a doctor (1.8) and nurse (2). After we control for the FPM spillover using neighboring cities near diferent thresholds, our results show that the reduction in morbidity and mortality is largely due to the spillover e ect, but there are negative spillover on preventive actions, as PSF doctors visits and vaccination. Finally, the negative spillover e ect on health resources may be due free riding or political coordination problems, as in the case of the number of hospital beds, but also due to to competition for health professionals, as in the case of number of doctors (-0.35 and -0.87, respectively), specially general practitioners and surgeons (-1.84 and -2.45).

Regulating State Aid: Inter-jurisdictional competition, public choice, and corporate governance

Depending on the regulatory regime they are subject to, governments may or may not be allowed to hand out state aid to private firms. The economic justification for state aid can address several issues present in the competition for capital and the competition for transfers from the state. First, there are principal-agent problems involved at several stages. Self-interested politicians might enter state aid deals that are the result of extensive rent-seeking activities of organized interest groups. Thus the institutional design of political systems will have an effect on the propensity of a jurisdiction to award state aid. Secondly, fierce competition for firm locations can lead to over-spending. This effect is stronger if the politicians do not take into account the entirety of the costs created by their participation in the firm location race. Thirdly, state aid deals can be incomplete and not in the interest of the citizens. This applies if there are no sanctions if firms do not meet their obligations from receiving aid, such as creating a certain number of jobs or not relocating again for a certain amount of time. The separation of ownership and control in modern corporations leads to principal-agent problems on the side of the aid recipient as well. Managers might receive personal benefits from subsidies, the use of which is sometimes less monitored than private finance. This can eventually be to the detriment of the shareholders. Overall, it can be concluded that state aid control should also serve the purpose of regulating the contracting between governments and firms. An extended mandate for supervision by the European Commission could include requirements to disincentive the misuse of state aid. The Commission should also focus on the corporate governance regime in place in the jurisdiction that awards the aid as well as in the recipient firm.

The Hungarian Economic Elite After the Political Transition

Erzsebet Szalai (Hungary). The Hungarian Economic Elite after the Political Transition. Ms. Szalai is a research fellow in the Institute of Political Sciences in Budapest and worked on this project from July 1996 to June 1998. In the period following the political changes of 1989, the leading forces of the economic elite have gained increasing superiority over the political and cultural elites, with the clear ambition of putting the latter to their service. The power relations within the economic elite were characterised by "a war of all against all". The desire to gain precedence over others became an openly declared value. The formation of estates and the intensification of competition became embodied in a multitude of lobbies which cropped up to assert short-term interests. After the state socialist period, possession of at least two of the social, economic and cultural forms of capital is necessary to join one of the three segments of the elite: political, cultural or economic. What defines the ability of the members of the three elite groups to assert their interests is their ability to convert any of the three types of capital into another. That is to say, the basis on which they can retain and extend their position is "symbolic capital" as interpreted by Bourdieu. The concept of symbolic capital is useful for describing the power relations following the collapse of state socialist systems and societies. In the state-socialist system, the political, economic and cultural spheres are tightly interwoven, and this interpenetration slackens only slowly after the system's disintegration. A close institutional relationship between the three spheres continues to make it easier for power actors to convert social, economic and cultural capital from one type to another. Symbolic capital, or the easy transfer between the three spheres, in turn reproduces the institutional relationship, or more precisely, complicates the separation of the three spheres after the fall of state socialism.

Exceptional or just well connected? Political entrepreneurs and brokers in policy making

Policy brokers and policy entrepreneurs are assumed to have a decisive impact on policy outcomes. Their access to social and political resources is contingent on their influence on other agents. In social network analysis (SNA), entrepreneurs are often closely associated with brokers, because both are agents presumed to benefit from bridging structural holes; for example, gaining advantage through occupying a strategic position in relational space. Our aim here is twofold. First, to conceptually and operationally differentiate policy brokers from policy entrepreneurs premised on assumptions in the policy-process literature; and second, via SNA, to use the output of core algorithms in a cross-sectional analysis of political brokerage and political entrepreneurship. We attempt to simplify the use of graph algebra in answering questions relevant to policy analysis by placing each algorithm within its theoretical context. In the methodology employed, we first identify actors and graph their relations of influence within a specific policy event; then we select the most central actors; and compare their rank in a series of statistics that capture different aspects of their network advantage. We examine betweenness centrality, positive and negative Bonacich power, Burt’s effective size and constraint and honest brokerage as paradigmatic. We employ two case studies to demonstrate the advantages and limitations of each algorithm for differentiating between brokers and entrepreneurs: one on Swiss climate policy and one on EU competition and transport policy.

The Political Candidacy of EU Migrants in their European Countries of Residence. The Case of British and Romanians Standing in Spanish Local Elections

What explains the variation in how European citizens of diverse origins are politically incorporated in the member states of residence? This paper argues that immigrant groups’ status in the host society plays an important role in political party responses to immigrants’ political participation. Drawing on the case of Romanian and British candidacies in the Spanish local elections from 2011, the paper finds that the level of competition between parties is the key mechanism for incorporating candidates from a positively/neutrally perceived group. Instead, a greater level of ethnic diversity encourages the incorporation of candidates from the negatively perceived group. To demonstrate this, the paper uses an original data-set with the Romanian and British candidates in a large number of Spanish localities.

Vivienda y Revolución. El Concurso entre Camaradas de la OSA, la Sección de Tipificación del Stroykom y la Casa Experimental de Transición Narkomfin (1926-1930) = Housing and Revolution. OSA’s Comradely Competition, Typification Section of the Stroykom and Narkomfin Experimental Transitional House (1926-1930)

La cuestión del asentamiento socialista en la URSS durante la década de 1920 estuvo caracterizada por el objetivo de definir y establecer un estado socialista en términos políticos, sociales y económicos. En este contexto de inestabilidad y cambio, un grupo de arquitectos pertenecientes a la Asociación de Arquitectos Contemporáneos, OSA, y liderado por Moisey Ginzburg, abordó el tema de la vivienda obrera asumiendo la responsabilidad y el compromiso por alcanzar un nuevo orden social. Su misión no consistió únicamente en solucionar el problema del alojamiento para los trabajadores en las grandes ciudades soviéticas, sino en redefinirlo como el marco adecuado para una sociedad sometida a un cambio sin precedentes que, al mismo tiempo y en un proceso dialéctico, debía contribuir a la construcción de esa nueva sociedad. La respuesta dada por la OSA trascendió el diseño inmediato bajo los estándares modernos establecidos en Occidente y tomó forma en un proceso de investigación que habría de prolongarse durante cinco años. Este trabajo, que culminó con la construcción y puesta en crisis de la Casa Narkomfin, se desarrolló en tres aproximaciones sucesivas. La primera, de carácter conceptual, consideró la participación ciudadana, así como de especialistas independientes, formalizándose en el Concurso entre Camaradas convocado por la OSA en 1926. La segunda aproximación al problema de la vivienda obrera se articuló a través de la investigación llevada a cabo por la Sección de Tipificación del Stroykom, esta vez desde premisas científicas y metodológicas. Finalmente, las conclusiones alcanzadas fueron transferidas a la práctica arquitectónica por medio de la construcción de seis Casas Experimentales de Transición, entre las que destacó la Casa Narkomfin. Este último acercamiento, de carácter empírico, ha sido tradicionalmente examinado por los expertos como un hecho aislado. Sin embargo, su estudio debe trascender necesariamente el genio del autor-creador en favor del proceso de investigación al que pertenece. En esta tesis, la Casa Narkomfin no se presenta sólo como el paradigma de vivienda soviética de vanguardia al que estamos acostumbrados, sino como un prototipo que recoge los principios y conclusiones alcanzados en las aproximaciones conceptuales y científicas precedentes. Únicamente desde este punto de vista cobra sentido la consideración de Ginzburg sobre su propio edificio como un medio propositivo y no impositivo: un proyecto concebido como una herramienta de transición hacia una sociedad más avanzada. ABSTRACT The question of mass housing in the USSR during the Twenties was marked by the drive to define and establish a socialist state in political, social and economic terms. In this context of instability and change, a group of architects gathered together under the Association of Contemporary Architects, OSA, led by Moisey Ginzburg, to address the issue of mass housing, thus taking on the responsibility and being committed to creating a new social order. Their quest not only involved solving the problem of housing for workers in large Soviet cities, but also redefining this solution as an appropriate framework for a society undergoing dramatic changes which, at the same time and in a dialectical process, would contribute to the creation of this new society. The solution provided by OSA transcended Modern standards of immediate design set by the West and was the result of a research process that would last five years. This work culminated in the construction of Narkomfin House and its self-criticism, developed in three successive approaches. The first was conceptual, being formalized in the Comradely Competition held by the OSA in 1926 and taking into account the participation of citizens and independent experts. The second approach to the problem of mass housing involved research developed by the Typification Section of the Stroykom, this time under scientific and methodological premises. Finally, the conclusions reached were put in practice with the construction of six Experimental Transitional Houses of which the most notable is Narkomfin House. This third empirical approach has traditionally been examined by scholars in isolation. However, its study must necessarily transcend the genius of the author-creator and involve the research process of which it is part. In this thesis, Narkomfin House is presented not only as the paradigm in Soviet housing avant-garde we are used to, but also as a prototype reflecting the principles and conclusions reached in the preceding conceptual and scientific approaches. Only from this point of view does Ginzburg’s understanding of his own building as a proactive and non-imposed environment make sense: a project conceived as a transition tool towards a more advanced society.

Le quatrième paquet ferroviaire: l’impossible libéralisation? = The fourth railway package: the impossible liberalization? Brugges Political Research Paper No. 33, January 2014

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