Electoral opportunism and fiscal policy before and after the EMU

A Masters Thesis, presented as part of the requirements for the award of a Research Masters Degree in Economics from NOVA – School of Business and Economics

Do political incentives matter for tax policies? Ideology, opportunism and the tax structure

This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in preelectoral periods and that capital effective tax rates (defined broadly to include taxes on selfemployed income) are reduced by more than effective labor tax rates.

Regulation and opportunism: How much activism do we need?

This paper analyzes the current trend towards firms self-regulation as opposed to the formal regulation of a negative externality. Firms respond to increasing activism in the market(conscious consumers that take into account the external effects of their purchase) by providing more socially responsible goods. However, because regulation is the outcome of a political process, an increase in activism might imply an inefficiently higher externality level. This may happen when a majority of non-activist consumers collectively free-ride on conscious consumers. By determining a softer than optimal regulation, they benefit from the behavior of firms, yet they have access to cheaper (although less efficient) goods.

The end of the opportunism vs trust debate: bounded reliability as a new envelope concept in research on MNE governance

Modern transaction cost economics (TCE) thinking has developed into a key intellectual foundation of international business (IB) research, but the Williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism. In this paper we assess both the opportunism concept and existing alternatives such as trust within the context of IB research, especially work on multinational enterprise (MNE) governance. Case analyses of nine global MNEs illustrate an alternative to the opportunism assumption that captures more fully the mechanisms underlying failed commitments inside the MNE. As a substitute for the often-criticized assumption of opportunism, we propose the envelope concept of bounded reliability (BRel), an assumption that represents more accurately and more completely the reasons for failed commitments, without invalidating the other critical assumption in conventional TCE (and internalization theory) thinking, namely the widely accepted envelope concept of bounded rationality (BRat). Bounded reliability as an envelope concept includes two main components, within the context of global MNE management: opportunism as intentional deceit, and benevolent preference reversal. The implications for IB research of adopting the bounded reliability concept are far reaching, as this concept may increase the legitimacy of comparative institutional analysis in the social sciences.

On the opportunism-independent theory of the firm

Previous developments in the opportunism-independent theory of the firm are either restricted to special cases or are derived from the capabilities or resource-based perspective. However, a more general opportunism-independent approach can be developed, based on the work of Demsetz and Coase, which is nevertheless contractual in nature. This depends on 'direction', that is, deriving economic value by permitting one set of actors to direct the activities of another, and of non-human factors of production. Direction helps to explain not only firm boundaries and organisation, but also the existence of firms, without appealing to opportunism or moral hazard. The paper also considers the extent to which it is meaningful to speak of 'contractual' theories in the absence of opportunism, and whether this analysis can be extended beyond the employment contract to encompass ownership of assets by the firm. © The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

When do firms conform? The effect of regulatory control processes on compliance and opportunism

The authors use social control theory to develop a conceptual model that addresses the effectiveness of regulatory agencies’ (e.g., Food and Drug Administration, Occupational Safety and Health Administration) field-level efforts to obtain conformance with product safety laws. Central to the model are the control processes agencies use when monitoring organizations and enforcing the safety rules. These approaches can be labeled formal control (e.g., rigid enforcement) and informal control (e.g., social instruction). The theoretical framework identifies an important antecedent of control and the relative effectiveness of control’s alternative forms in gaining compliance and reducing opportunism. Furthermore, the model predicts that the regulated firms’ level of agreement with the safety rules moderates the relationships between control and firm responses. A local health department’s administration of state food safety regulations provides the empirical context for testing the hypotheses. The results from a survey of 173 restaurants largely support the proposed model. The study findings inform a discussion of effective methods of administering product safety laws. The authors use social control theory to develop a conceptual model that addresses the effectiveness of regulatory agencies’ (e.g., Food and Drug Administration, Occupational Safety and Health Administration) field-level efforts to obtain conformance with product safety laws. Central to the model are the control processes agencies use when monitoring organizations and enforcing the safety rules. These approaches can be labeled formal control (e.g., rigid enforcement) and informal control (e.g., social instruction). The theoretical framework identifies an important antecedent of control and the relative effectiveness of control’s alternative forms in gaining compliance and reducing opportunism. Furthermore, the model predicts that the regulated firms’ level of agreement with the safety rules moderates the relationships between control and firm responses. A local health department’s administration of state food safety regulations provides the empirical context for testing the hypotheses. The results from a survey of 173 restaurants largely support the proposed model. The study findings inform a discussion of effective methods of administering product safety laws.

Opportunism, hold-up and the (contractual) theory of the firm

This paper considers the role of opportunism in three contractual theories of the firm: rent-seeking theory, property rights theory, and agency theory. In each case I examine whether it is possible to have a functioning contractual theory of the firm without recourse to opportunism. Without opportunism firms may still exist as a result of issues arising from (incomplete) contracting. Far from posing a problem for the theory of the firm, questioning the role of opportunism and the ubiquity of the hold-up problem helps us understand more about the purpose and functions of contracts which go beyond mere incentive alignment.

The franchise dilemma:entrepreneurial characteristics, relational contracting, and opportunism in hybrid governance

Using franchise data, we identify that entrepreneurial characteristics of franchisees partially impact on their opportunistic tendencies. Further, relational contracting increases franchisee opportunism by strengthening the opportunism-enhancing impact of entrepreneurial characteristics. These findings point to a key dilemma franchisors need to be aware of: Entrepreneurially minded franchisees who might be better at exploiting market opportunities for their units may also behave more opportunistically, if given the chance through a more relational contracting regime. At the same time, if they perceive the contractual framework as being too rigid, they may be less able to leverage their capabilities, become dissatisfied, and exit the system.

The Commission, the Single Market and the Crisis: The Limits of Purposeful Opportunism

The economic and financial crisis opened a window of opportunity to place the Single Market back on top of the European agenda as part of a two-tiered crisis response, which also included reinforced financial supervision and economic co-ordination. We argue that the Commission acted as a ‘purposeful opportunist’ in both tiers; but whereas in economic governance issues there was breakthrough change in the Commission's achievements and competences, in the Single Market realm policy change was fairly modest. Using process tracing analysis our goal is to explain why the Commission did not succeed in furthering a genuine Single Market reform. Our findings suggest that the Commission's entrepreneurship was constrained by the limited salience of Single Market issues in the crisis context and by the lack of actual political commitment from the other relevant stakeholders. Thus, our research highlights the limits of the Commission's opportunistic behaviour in less advantageous circumstances.

Communism and Public Opinion in Queensland, 1939-1951 : An Explanation of Queensland's Vote in the 1951 Anti-Communist Referendum

The starting point of this thesis was a desire to explain the rapid demise in the popularity which the Communist Party enjoyed in Queensland during the second world war. Wartime Queensland gave the Australian Communist Party its highest state vote and six years later Queensland again gave the Communist Party its highest state vote - this time however, to ban the Party. From this I was led into exploring the changing policies, beliefs and strategies of the Party, as well as the many sub-groups on its periphery, and the shifts in public response to these. In 1939 Townsville elected Australia's first Communist alderman. Five years later, Bowen elected not only Australia's first but also the British Empire's first, Communist state government member. Of the five electorates the Australian Communist Party contested in the 1944 Queensland State elections, in none did the Party's candidate receive less than twenty per-cent of the formal vote. Not only was the Party seemingly enjoying considerable popular support but this was occurring in a State which, but for the Depression years (May 1929 - June 1932) had elected a Labor State Government at every state election since 1915. In the September 1951 Constitution Alteration Referendum, 'Powers To Deal With Communists and Communism', Queensland regist¬ered the nation's highest "Yes" majority - 55.76% of the valid vote. Only two other states registered a majority in favour of the referendum's proposals, Western Australia and Tasmania. As this research was undertaken it became evident that while various trends exhibited at the time, anti-Communism, the work of the Industrial Groups, Labor opportunism, local area feelings, ideological shifts of the Party, tactics of Communist-led unions, etc., were present throughout the entire period, they were best seen when divided into three chronological phases of the Party's history and popularity. The first period covers the consolidation of the Party's post-Depression popularity during the war years as it benefited from the Soviet Union's colossal contribution to the Allied war efforts, and this support continued for some six months or so after the war. Throughout the period Communist strength within the trade union movement greatly increased as did total Party membership. The second period was marked by a rapid series of events starting in March 1946, with Winston Churchill's "Official Opening" of the Cold War by his sweeping attack on Communism and Russia, at Fulton. Several days later the first of a series of long and bitter strikes in Communist-led unions occurred, as the Party mobil¬ized for what it believed would be a series of attacks on the working class from a ruling class, defending a capitalist system on the verge of an economic collapse. It was a period when the Party believed this ruling class was using Labor reformism as a last desperate 'carrot' to get workers to accept their lot within a capitalist economic framework. Out of the Meat Strike emerged the Industrial Groups, who waged not only a determined war against Communist trade union leadership but also encouraged the A.W.U.-influenced State Labor apparatus to even greater anti-Communist antagonisms. The Communist Party's increasing militancy and Labor's resistance to it, ended finally in the collapse of the Chifley Labor government. Characteristically the third period opens with the Communist Party making an another about-face, desperately trying to form an alliance with the Labor Party and curbing its former adventurist industrial policy, as it prepared for Menzies' direct assault. The Communist Party's activities were greatly reduced, a function of both a declining member-ship and, furthermore, a membership reluctant to confront an increasingly hostile society. In examining the changing policies, beliefs and strategies of the Party and the shifts in public response to these, I have tried to distinguish between general trends occurring within Australia and the national party, and trends peculiar to Queensland and the Queensland branch of the Party, The Communist Party suffered a decline in support and membership right across Australia throughout this period as a result of the national policies of the Party, and the changing nature of world politics. There were particular features of this decline that were peculiar to Queensland. I have, however, singled out three features of particular importance throughout the period for a short but more specifically detailed analysis, than would be possible in a purely chronological study: i.e. the Party's structure, the Party's ideological subservience to Moscow, and the general effect upon it of the Cold War.