Journal Cover
Economics of Governance
Journal Prestige (SJR): 0.431
Citation Impact (citeScore): 1
Number of Followers: 9  
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 1435-8131 - ISSN (Online) 1435-6104
Published by Springer-Verlag Homepage  [2626 journals]
  • A theory of revolutionary organizations
    • Abstract: Abstract This paper models a revolutionary organization committed to a project of radical social change over a long time horizon, and therefore, engaged in selling promises to both customers and workers in exchange for current effort and support. To build customer trust and provide members incentives, the organization structures itself as a producer cooperative and sets up a parallel sector that yields cash revenues and provides short-term benefits. This parallel activity, if successful, may represent a temptation away from revolution, but it is subject to competition from other providers or from the state. The main result is that, unlike a profit-maximizing firm, the cooperative reacts to increased competition by shrinking the parallel sector and specializing in revolution; hence, reform expands at the expense of revolution only if the parallel sector approaches monopoly. We find supportive historical evidence in a survey of socialist revolutions and social democracies, nationalist movements, and Islamist insurgencies.
      PubDate: 2020-06-19
  • A unifying theory of positive and negative incentives in international
           relations: sanctions, rewards, regime types, and compliance
    • Abstract: Abstract Should democracies be rewarded and autocracies punished, or should it be the reverse' This is an important question for foreign policy makers who regularly find themselves wanting to alter the behavior of foreign governments favorable to their interests. Existing studies on economic sanctions and rewards provide an uneasy answer that sanctions are more effective toward democracies and rewards work better toward autocracies, suggesting democracies need to be punished while autocracies need to be rewarded. We revisit the issue of regime type and incentive form by building a game theoretical model focusing on domestic political dynamics in a Target country. When we distinguish betwen three types of reigmes lined up on an accountability continuum, the theoretical model yields the claim that sanctions and rewards work better with both extremes—democracies and dictatorships—than with the intermediate category of limited autocracy, for which only rewards work.
      PubDate: 2020-06-15
  • Fractionalization and reform: a framework of political collaboration with
           application to Lebanon
    • Abstract: Abstract How does fractionalization affect political collaboration on reform' We develop a theory to explain observable variation in legislative output over time and policy areas. We show how the properties of a reform project determine the extent to which fractionalization affects political collaboration on reform. We apply our framework to the case of Lebanon and present mixed-methods evidence based on a novel comprehensive dataset of legislative activity and 32 interviews with parliamentarians, ex-ministers, and other high ranking officials. Our findings contribute to explaining ambiguous evidence in the literature on the political economy of reform.
      PubDate: 2020-04-28
  • Medieval European traditions in representation and state capacity today
    • Abstract: Abstract Rich economies are characterized by the coincidence of, on the one hand, high state capacity and, on the other, well-functioning markets and the rule of law. They have states that are powerful and centralized and yet also limited. Furthermore, relatively low rates of shadow economic activity and tax evasion suggest that citizens perceive their states’ limitations to be credible. This suggests that a state’s ability to be credibly limited may facilitate its investments in state capacity. Consistent with this, we explore the potential link between historical traditions of representative governance institutions and state capacity today. We report that medieval and early modern representative assembly experiences positively correlate with higher tax revenues, smaller shadow economies, greater state control of violence and yet fewer state resources dedicated to violence. Relative to tax revenues, the evidence regarding shadow economies and violence is more robust to various controls and samples.
      PubDate: 2020-03-03
  • The Peter and Dilbert Principles applied to academe
    • Abstract: Abstract The academic literature has long held that firms typically develop a system of incentives and rules that are meant to encourage employees to maximize their effort, and the firms’ profits. As a result, firms’ employees often rise through the ranks of the hierarchies in their firms through internal promotion, a process that results in the development of an internal labor market. This study explores the process of internal promotion, and its impact on firm behavior, with particular attention to both the Peter Principle and the Dilbert Principle. Both a formal model and a brief application of it to higher education are presented. In the case of the former, data related to U.S. business school deans indicate that more than one-third of all appointments come from internal candidates, with fully 20% of these being made from the rank-and-file professorate, thus supporting the model’s implications concerning the Peter Principle. Additionally, the data also reveal that the tenure of a typical “outside” dean exceeds that of a typical “inside” dean, thus supporting the model’s implications for the Dilbert Principle.
      PubDate: 2020-02-07
  • Budgetary choices and institutional rules: veto rules and budget
    • Abstract: Abstract Studies of the line item veto have traditionally focused on whether it leads to less spending than an all-or-nothing veto and have only produced modest results. However, other impacts that differences in rule choice might effectuate have not been investigated in detail. We examine the role of veto rules for budgetary volatility, the extent to which expenditures vary. Theoretically, we model budget choices given all-or-nothing, line item, and item-reduction vetoes and demonstrate that more encompassing veto authority does not necessarily decrease spending but should result in more political gridlock, implying less volatility. We then analyze the model’s prediction by examining American state budget expenditures from 1978 to 2007. Whether one looks at budget categories or total spending, volatility is greater with the all-or-nothing veto relative to more stringent alternatives. Hence, delegating greater authority to executives such as governors, perhaps unexpectedly, likely strengthens expectations about future budgets while reducing the responsiveness of spending to changing preferences or circumstances.
      PubDate: 2020-01-25
  • Borda paradox in the 2017 Iranian presidential election: empirical
           evidence from opinion polls
    • Abstract: Abstract Different voting paradoxes identified by social choice theorists have rarely been documented in real-world elections. The collected data from the opinion polls in the 2017 Iranian presidential election provides substantial empirical evidence indicating that during the electoral campaigns, strong Borda paradox (the Condorcet loser wins plurality.) and weak Borda paradox (An alternative that is not the Condorcet winner wins plurality.) have occurred. At the same time, there was no evidence of a Condorcet paradox, i.e., a cycle among the top three candidates. The results support the empirical relevance of theoretical paradoxes in social choice and a call for the importance of voting procedures.
      PubDate: 2019-12-21
  • The role of the past in public policy: empirical evidence of the long-term
           effect of past policy and politics on the local budget balance
    • Abstract: Abstract The main focus of this paper is on the role of the past in budgetary policy and the impact of a multitude of relevant political characteristics on the local budget balance in a dynamic context. Although the importance of past policy was stated approximately 6 decades ago by Lindblom (Public Adm Rev 19(2):79–88, 1959), dynamic studies are relatively underexposed in recent literature on the budget balance at the local government level. The studies that do take into account the dynamics surprisingly do not focus on the past but treat it as a control variable. This paper exhibits the theoretical background of introducing past performance into the analysis. It is also noticeable that the dynamic studies thus far only test the partisan and the political budget cycle hypotheses. In the empirical part of this study, we add government fragmentation and government power to the dynamic analysis, and we look for both short- and long-term effects on the budget balance. In doing so, we test the impact of multiple political characteristics simultaneously on a dataset of all Flemish local governments for the period 1995–2017. The results from the dynamic panel analysis show that past performance is of importance, as are the electoral budget cycle and the power of the government. The importance of the government power for the budget balance is a new insight in dynamic research. As we focus on the long-term impact of the explanatory variables due to the dynamics, we avoid the underestimation of the impact of politics on the budget balance in the long run.
      PubDate: 2019-12-03
  • The economics of politics: patronage and political selection in Italy
    • Abstract: Abstract This article investigates patronage in the Second Italian Republic by considering patronage a fundamental device able to guarantee a party presence in the governance of public bodies. The study sheds light on a particular area of party patronage, namely political appointments concerning legislators; it analyzes the factors which could determine whether a member of Parliament will be appointed to a state-owned enterprise’s board of directors after a legislature, seeking to gain a better understanding of how political actors exploit this opportunity. Direct political connections can be conceptualized as instruments to control and reward politicians and/or strategies to enhance political control over the bureaucracy. The empirical investigation suggests that legislators’ efforts in Parliament play a role in the likelihood of patronage appointments. Education does not seem to significantly increase the probability of receiving a nomination for a seat on public firms’ boards, moreover our result casts doubt on the merits or competencies of the appointed politicians.
      PubDate: 2019-11-05
  • Does enfranchisement affect fiscal policy' Theory and empirical
           evidence on Brazil
    • Abstract: Abstract This paper studies the effect of political participation on public spending at the local level in Brazil. In particular, we look at the phased-in implementation of electronic voting in the late 1990s—which enfranchised poorer voters by decreasing the number of invalid votes—to identify the causal effect of political participation on public spending. We build a theoretical political economy model which allows voters to cast, not purposefully, an invalid vote, and show that when poorer voters’ likelihood of casting a valid vote increases, public social spending increases as well. We test this prediction empirically using a difference-in-differences model where municipalities using electronic voting constitute our treatment group. We find that an increase of 1 percentage point in the valid vote to turnout ratio for state representatives increases health spending by 1.8%; education by 1.4%; public employment by 1.25%; intergovernmental transfers by 1%; and local taxes by 2.6%.
      PubDate: 2019-10-25
  • Do victims of crime trust less but participate more in social
    • Abstract: Abstract We explore how crime victimization affects two of the main dimensions of social capital: trust and participation in social groups. Using a large database that includes many Latin American countries, we find that victimization lowers trust, especially in other people and the police. However, participation in social groups is increased as a result of this event. These findings suggest that the net effect of victimization on social capital is miscalculated unless all of its dimensions are taken into account.
      PubDate: 2019-10-12
  • Is it the gums, teeth or the bite' Effectiveness of dimensions of
           enforcement in curbing corruption
    • Abstract: Abstract Adding a somewhat new dimension to the substantial body of research on factors driving cross-national corruption, this paper examines the effectiveness of dimensions of enforcement in reducing corruption. The main novelty lies in comparing the relative influences of latent enforcement (police, judicial, and prosecutorial employment) versus actual enforcement (conviction rates) and enforcing institutions. Results show that piecemeal enforcement efforts to combat corruption by increasing enforcement employment would not be effective, rather comprehensive improvements in institutional quality by strengthening the rule of law or regulatory quality bear greater results. These findings are robust across indices of corruption that capture somewhat different aspects. Thus, in terms of the title of the paper, when it comes to corruption control, strong gums (institutions) are more effective than showing teeth (enforcement employment) or the bite (conviction rates).
      PubDate: 2019-09-28
  • Production inefficiency, cross-ownership and regional tax-range
    • Abstract: Abstract Using a simple asymmetric capital-tax competition model where the allocation of mobile capital is distorted in non-cooperative equilibrium, this paper analyzes the welfare impact of regional tax coordination on a range of possible tax rates (a combination of maximum and minimum capital taxes made by a subset of regions). Under the assumption that the ownership of immobile factors (e.g., business land) is diversified across regions, a new possibility of beneficial coordination arises which has not been identified before: tax-range coordination “among capital-exporting regions” or “among capital-importing regions” may improve the welfare of all regions. This is in contrast to the case without cross-ownership where both capital-exporting and capital-importing regions must be involved in tax-range coordination in order to achieve a Pareto improvement.
      PubDate: 2019-09-24
  • Intergroup inequality and the breakdown of prosociality
    • Abstract: Abstract Each year about 60 million people flee their home country and seek to cross into developed countries, thus urging the latter to develop different policy responses to face the growing concerns about how immigration may affect social order. We design a novel two-part public goods experiment with radical income asymmetry between groups to investigate how voting on (not) helping less-endowed others affects pro-social behavior in the voting groups. We find that no group ever votes to help less-endowed ones. This, in turn, results in a breakdown of prosociality within the voting groups. We study the reasons why the implementation of voting—compared to no voting or to imposed solidarity—results in a significant, negative impact on cooperation levels within the voting groups.
      PubDate: 2019-07-05
  • Political incentives in firms’ financial reporting: evidence from the
           crackdown on corrupt municipal officials
    • Abstract: Abstract This paper examines political incentives in firms’ financial reporting during the anti-corruption campaign in China. We find robust evidence that the turnover of municipal officials due to the prosecution of corruption causes affiliated firms to strategically withhold good news relative to bad news. This effect is more pronounced among state-owned firms and firms located in highly corrupt places, while it is depressed among firms with the big-four auditing firms and among firms with Qualified Foreign Institutional Investors. Further tests show that this effect is temporary. We find affiliated firms release minor bad news on time and withhold minor good news during the turnover of corrupt municipal officials. Overall, our study provides novel evidence that firms have political incentives in financial reporting regarding the release of good and bad news, and the anti-corruption campaign in China can act as a governance mechanism to temporarily improve the financial reporting environment.
      PubDate: 2019-05-31
  • When the purchasing officer looks the other way : on the waste effects of
           debauched local environment in public works execution
    • Authors: Calogero Guccio; Domenico Lisi; Ilde Rizzo
      Abstract: Abstract There is extensive evidence on waste effects of environmental corruption in public works procurement. However, corruption is not the only source of waste. In this paper, we adopt a wider perspective and look at the environmental institutional quality, identifying the channels through which it can lead to different types of waste in public works execution. We firstly provide some empirical evidence on public works contracts managed by a large sample of Italian municipalities, showing that performance measures of public works execution are associated with the quality of local institutional environment in which they are executed. Motivated by this evidence, we develop a model where weak institutions entail low accountability of purchasing officers, thus they have low incentives to pursue the mandated task of monitoring the execution of contracts, even if no bribery occurs. Then, we assume that endemic environmental corruption increases the return of managerial effort devoted to rent-seeking activities for getting cost overruns, leading the contractor to divert effort from the productive activity. Overall, our model predictions conform well with the empirical evidence on Italian public works execution.
      PubDate: 2019-02-04
      DOI: 10.1007/s10101-019-00223-5
  • The impact of state intervention and bankruptcy authorization laws on
           local government deficits
    • Authors: Lang Yang
      Abstract: Abstract Local governments in the United States can file for bankruptcy to restructure their debt if allowed by state laws. While some states legislate an unconditional authorization, others conditionally permit local filings, do not give authorization, or intervene in local crises. This paper investigates the impact of state policy adoption on local governments’ revenue to expense ratio, a measure of deficit. While bankruptcy authorizations do not show an impact at the mean, a median locality decreases the revenue–expense ratio after the state adopts an authorization unconditional on state intervention, suggesting a moral hazard effect. Localities with conditionally high deficits, however, increase the ratio upon the adoption of a conditional authorization, possibly because they want to avoid being subjective to conditions placed by states.
      PubDate: 2019-02-02
      DOI: 10.1007/s10101-019-00222-6
  • A test of the institutionally-induced equilibrium hypothesis: on the
           limited fiscal impact of two celebrity governors
    • Authors: Roger D. Congleton; Yang Zhou
      Abstract: Abstract The governorships of Jesse Ventura of Minnesota and Arnold Schwarzenegger of California provide two natural experiments for testing the institutionally induced stability hypothesis. Both men rose to their governorships through unique career and electoral paths that would reduce the stabilizing effects of partisan commitments and electoral competition, which would tend to increase their impact on public policy. Nonetheless, our evidence suggests that despite their unique backgrounds and paths to office neither governor had a statistically significant impact on their state’s expenditures or deficits.
      PubDate: 2018-12-14
      DOI: 10.1007/s10101-018-0218-z
  • Expenditure visibility and voter memory: a compositional approach to the
           political budget cycle in Indian states, 1959–2012
    • Authors: J. Stephen Ferris; Bharatee Bhusana Dash
      Abstract: Abstract In this paper we argue that the political budget cycle test for opportunistic spending is weakened by the absence of a strong reason for why spending increases should be restricted to the time period leading into the next election. One would expect that a targeted benefit should elicit the same degree of voter support whenever it is received. Here we argue that while the political need to fulfill a list of pre-election promises serves to constrain excessive spending, the characteristic that some expenditure items better demonstrate the contributions of the current government to voters (with depreciating memories) leads to a predictable reallocation of the composition of budgetary spending across the life of a government. Our test for a predictable timing pattern to subcomponents of the budget uses capital expenditures as the budgetary item with greater visibility spillovers and a data set of 14 Indian states over 54 years (1959/60–2012/13). The predictions that capital expenditures relative to both total government expenditure and government consumption should rise across the governing interval are found to be consistent with the data and provide a better fit with the data than more traditional political budget cycle models that use aggregate spending/deficits in the pre-election period.
      PubDate: 2018-11-15
      DOI: 10.1007/s10101-018-0216-1
  • Economies of scale and governance of library systems: evidence from West
    • Authors: Amir B. Ferreira Neto; Joshua C. Hall
      Abstract: Abstract Public libraries are a billion dollar industry in the United States. We explore the institutional determinants of public library technical efficiency using data from West Virginia. We first document considerable cross-district variation in library efficiency. While the average library district in our sample is between 81 and 90% efficient depending upon the year and measure, there are many district-years that are under 50%. We then explain our technical efficiency measures as a function of institutional variables reflecting the type of district and sources of funding. We find consistent evidence that urban libraries are more inefficient, perhaps because they are too small to achieve sufficient economies-of-scale in production of library services. In addition, we find revenue from local sources is associated with reduced efficiency, contrary to what would be predicted by local public goods producer theory.
      PubDate: 2018-10-27
      DOI: 10.1007/s10101-018-0215-2
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