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.

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. ^

The political economy of industrial policy in Peru and Ecuador: 1980-2010

This dissertation focuses on industrial policy in two developing countries: Peru and Ecuador. Informed by comparative historical analysis, it explains how the Import-Substitution Industrialization policies promoted during the 1970s by military administration unravelled in the following 30 years under the guidance of Washington Consensus policies. Positioning political economy in time, the research objectives were two-fold: understanding long-term policy reform patterns, including the variables that conditioned cyclical versus path-dependent dynamics of change and; secondly, investigating the direction and leverage of state institutions supporting the manufacturing sector at the dawn, peak and consolidation of neoliberal discourse in both countries. Three interconnected causal mechanisms explain the divergence of trajectories: institutional legacies, coordination among actors and economic distribution of power. Peru’s long tradition of a minimal state contrasts with the embedded character of Ecuador long tradition of legal protectionism dating back to the Liberal Revolution. Peru’s close policy coordination among stakeholders –state technocrats and business elites- differs from Ecuador’s “winners-take-all” approach for policy-making. Peru’s economic dynamism concentrated in Lima sharply departs from Ecuador’s competitive regional economic leaderships. This dissertation paid particular attention to methodology to understand the intersection between structure and agency in policy change. Tracing primary and secondary sources, as well as key pieces of legislation, became critical to understand key turning points and long-term patterns of change. Open-ended interviews (N=58) with two stakeholder groups (business elites and bureaucrats) compounded the effort to knit motives, discourses, and interests behind this long transition. In order to understand this amount of data, this research build an index of policy intervention as a methodological contribution to assess long patterns of policy change. These findings contribute to the current literature on State-market relations and varieties of capitalism, institutional change, and policy reform.

Sovereignty, Political Economy, and Economic Development in Native American Nations

Thesis (Ph.D.)--University of Washington, 2016-05

Toward a Political Theory of Environmental Policy.

This paper makes some steps toward a formal political economy of environmental policy. Economists' quasi-unanimous preferences for sophisticated incentive regulation is reconsidered. First, we recast the question of instrument choice in the general mechanism literature and provide an incomplete contract approach to political economy. Then, in various settings, we show why constitutional constraints on the instruments of environmental policy may be desirable, even though they appear inefficient from a purely standard economic viewpoint.

Da economia política à política econômica: o novo-desenvolvimentismo e o governo Lula

From political economy to economic policy: The neo-developmentalism and the Lula administration. This article critically reviews the design of neo-developmentalist economic policies in Brazil, in the first half of the last decade, and their relationship with the economic policies of the Lula administration after 2006. Paradoxically, the neo-developmentalist policies were implemented jointly with the main (neoliberal) macroeconomic policies which had been introduced earlier. The article reviews the relevant literature, and examines the contradictory nature of this 'inflection' of economic policy. So far, this combination of policies has achieved an unquestionable - though provisional - success, despite the persistence of the structural macroeconomic problems due to the continuity of the neoliberal policies.

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.

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.

The Political Economy of Active Labor-Market Policy

Active labor-market policies (ALMPs) have developed significantly over the past two decades across Organization for Economic Cooperation and Development (OECD) countries, with substantial cross-national differences in terms of both extent and overall orientation. The objective of this article is to account for cross-national variation in this policy field. It starts by reviewing existing scholarship concerning political, institutional, and ideational determinants of ALMPs. It then argues that ALMP is too broad a category to be used without further specification, and it develops a typology of four different types of ALMPs: incentive reinforcement, employment assistance, occupation, and human capital investment. These are discussed and examined through ALMP expenditure profiles in selected countries. The article uses this typology to analyze ALMP trajectories in six Western European countries and shows that the role of this instrument changes dramatically over time. It concludes that there is little regularity in the political determinants of ALMPs. In contrast, it finds strong institutional and ideational effects, nested in the interaction between the changing economic context and existing labor-market policies.

The Political Economy of Financial Crisis Policy. Bruegel Working Paper 2015/06, July 2015

Highlights • Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. • We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. • Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.

Essays on Development Policy and the Political Economy of Conflict

Electoral Rules and Leader Selection: Experimental Evidence from Ugandan Community Groups. Despite a large body of work documenting how electoral systems affect policy outcomes, less is known about their impact on leader selection. We study this by comparing two types of participatory decision making in Ugandan community groups: (i) vote by secret ballot and (ii) open discussion with consensus. Random assignment allows us to estimate the causal impact of the rules on leader types and social service delivery. Vote groups are found to elect leaders more similar to the average member while discussion group leaders are positively selected on socio-economic characteristics. Further, dropout rates are significantly higher in discussion groups, particularly for poorer members. After 3.5 years, vote groups are larger in size and their members save less and get smaller loans. We conclude that the secret ballot vote creates more inclusive groups while open discussion groups favor the already economically successful. Preparing for Genocide: Community Meetings in Rwanda. How do political elites prepare the civilian population for participation in violent conflict? We empirically investigate this question using data from the Rwandan Genocide in 1994. Every Saturday before 1994, Rwandan villagers had to meet to work on community infrastructure. The practice was highly politicized and, according to anecdotal evidence, regularly used by the political elites for spreading propaganda in the years before the genocide. This paper presents the first quantitative evidence of this abuse of the community meetings. To establish causality, we exploit cross-sectional variation in meeting intensity induced by exogenous weather fluctuations. We find that an additional rainy Saturday resulted in a five percent lower civilian participation rate in genocide violence. Selection into Borrowing: Survey Evidence from Uganda. In this paper, I study how changes to the standard credit contract affect loan demand and selection into borrowing, using a representative sample of urban micro enterprises, most with no borrowing experience. Hypothetical loan demand questions are used to test whether firm owners respond to changes in loans' contractual terms and whether take-up varies by firms' risk type and other firm owner characteristics. The results indicate that contracts with lower interest rates and less stringent collateral requirements attract less risky borrowers, suggesting that there is scope for improvement of standard financial contract terms. Credit Contract Structure and Firm Growth: Evidence from a Randomized Control Trial. We study the effects of credit contract structure on firm outcomes among small and medium sized firms. A randomized control trial was carried out to distinguish between some of the key constraints to efficient credit use connected to the firms' business environment and production function, namely (i) backloaded returns (ii) uncertain returns and (iii) indivisible fixed costs. Each firm was followed for the 1-year loan cycle. We describe the experiment and present preliminary results from the first 754 out of 2,340 firms to have completed the loan cycle. Firms offered a grace period have higher profits and higher household income than firms receiving a rebate later on as well as the control group. They also increased the number of paid employees  and reduced the number of unpaid employees, an effect also found among firms that received a cash subsidy at the beginning of the loan cycle. We discuss potential mechanisms behind these effects.

Space: Irrealis objects in technology policy and their role in a new political economy

In this article, I show how new spaces are being prefigured for colonization in new economy policy discourses. Drawing on a corpus of 1.3 million words collected from legislatures throughout the world, I show the role of policy language in creating the foundations of an emergent form of political economy: The analysis is informed by principles from critical discourse analysis (CDA), classical political economy and critical media studies. It foregrounds a functional aspect of language called process metaphor to show how aspects of human activity are prefigured for mass commodification by the manipulation of realis and irrealis spaces. I also show how the fundamental element of any new political economy, the property element, is being largely ignored. Current moves to create a privately owned global space, which is as concrete as landed property - namely, the electromagnetic spectrum - has significant ramifications for the future of social relations in any global knowledge economy.