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Abstract: Abstract We study the welfare impact of states competing with non-discretionary incentives for firms in an industry. A simple model of state competition and firm location choice enables welfare calculation with the first-order condition for incentives and firm profit function parameters. The model implies that state values for firms must be substantially heterogeneous and negatively correlated with firm profits for state competition to improve welfare. In an application to the craft brewing industry, we estimate the profit function by instrumenting endogenous incentives with a proxy for past lobbying activities of brewers in other states. We find that state competition mostly transfers tax dollars to firms without changing their geography. This is because firm profits vary more than state values, even though states with lower firm profits value firms more. PubDate: 2024-08-25
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Abstract: Abstract Legacy of statehood is seen as a positive influence on economic growth and development. The state antiquity literature argues that the more experience a country has with state institutions, the more beneficial the current state’s impact on development can be. While not discounting the advantages that a well-functioning state can provide for economic progress, we draw attention to an alternate mechanism: the presence of private institutions and practices that may contribute to both state formation and economic development. Rather than state antiquity being the lone cause of economic progress, states may benefit from already existing configurations of rules and conventions that were developed privately. Thus, we argue that order can precede and coincide with the state. We support our claim with qualitative evidence using historical case studies. PubDate: 2024-08-12
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Abstract: Abstract One of the most common policy recommendations in developing countries is titling land. Yet, titling programs around the developing world frequently fail to produce many titles. We try to understand these failures by exploring a titling program in Haiti in the 1930s. The program offered tenants renting public land an opportunity to privatize the land as a homestead, giving them an official title and ending rental payments. Making use of archival data on all homesteads granted in the first 16 years, we find the program created fewer than 700 homesteads. We discuss potential reasons for the program’s failure and argue that it failed because it required homesteaders to farm at least 50% of the plot in cash crops. We discuss whether this requirement was the government’s attempt to extract revenues from the land in the absence of other options or whether it was an intentional barrier to resist foreign interference. PubDate: 2024-08-09
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Abstract: Abstract We investigate differential responses by gender to competitive persuasion in political campaigns. We implemented a survey and a field experiment during two mayoral elections in Italy. Eligible voters were exposed to a positive or negative campaign by an opponent. The survey experiment used on-line videos and slogans. The field experiment used door-to-door canvassing. In both experiments, gender differences emerge. Females vote more for the opponent and less for the incumbent when exposed to positive—as opposed to negative—campaigning. Males do the opposite. These differences cannot be explained by gender identification, ideology, or other voters’ observable attributes. PubDate: 2024-08-05
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Abstract: Abstract This study investigates how local air quality influences UK Parliament members’ votes on environmental and climate change legislation. Using micro-spatial information at the 1 km-by-1 km grid level, I link local air quality to member of UK parliament (MPs') voting records from 2009 to 2019. I find compelling evidence that MPs representing highly polluted areas are more likely to vote against stringent environmental legislation. I also provide evidence that local political economy considerations constrain pro-environmental voting behaviour: industrialization exacerbates the negative relationship between pollution and pro-environmental voting behaviour by further discouraging MPs representing industrial areas from supporting stringent environmental legislations. These findings underscore the public choice trade-offs between enacting stringent climate change policies and preserving local industry and jobs. PubDate: 2024-08-03
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Abstract: Abstract External shocks (e.g., due to a pandemic) may lead to price jumps in the short term. Rather than being read as a signal of increased scarcity, the resulting “price gouging” is often ascribed to sellers’ selfish exploitation of the crisis. In our experimental study, we investigate the drivers of fairness perceptions regarding voluntary transactions in situations of increased scarcity and explore how they pertain to the economic policy debate on price gouging restrictions. Departing from previous research, our results show that perceptions of power, not of the seller as the profiteer (mercantilism), drive fairness perceptions. The more powerful a transaction partner is assumed to be, the less the respective transaction is regarded as fair. In line with the literature, we also find that fairness perceptions are correlated with zero-sum thinking (i.e., a denial of the mutuality of benefits implied by voluntary transactions). Our study helps to better understand why some market regulations appear attractive despite suboptimal outcomes, thus revealing a mixing of the micro and the macro cosmos, against which Hayek warned. By casting a light on the psychological mechanisms behind attitudes toward markets, we aim to improve the assessment of legitimacy issues and contribute to explaining (and overcoming) the moral paradox of modernity. PubDate: 2024-07-29
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Abstract: Abstract This study uses a survey experiment to test for fiscal illusion—the idea that taxpayers systematically misperceive their tax liabilities and contributions to public services. To date, the voluminous literature on fiscal illusion has not analyzed how better information on personalized total tax liabilities and contributions to public services would influence fiscal preferences. This is the first study to inform participants of their individual fiscal balance sheets comprising all major taxes regularly paid by taxpayers and their allocation to public services, thus comprehensively covering both sides of the fiscal account. This aim is achieved by embedding a novel personalized fiscal calculator in an online survey experiment administered to a representative sample of UK employees. The experiment finds evidence of fiscal illusion: providing personalized fiscal information reduces support for higher taxes and spending and increases support for lower taxes and spending. These findings indicate that taxpayers underestimate both their tax liabilities and the costs of public services. PubDate: 2024-07-16
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Abstract: Abstract Interpersonal networks facilitate business cooperation and socioeconomic exchange. But how can outsiders demonstrate their trustworthiness to join existing networks' Focusing on the puzzling yet common phenomenon of heavy drinking at China’s business banquets, we argue that this costly practice can be a rational strategy intentionally used by entrants to signal trustworthiness to potential business partners. Because drinking alcohol can lower one’s inhibitions and reveal one’s true self, entrants intentionally drink heavily to show that they have nothing to hide and signal their sincere commitment to cooperation. This signaling effect is enhanced if the entrants have low alcohol tolerance, as their physical reactions to alcohol (e.g., red face) make their drunkenness easier to verify. Our theory of heavy social drinking is substantiated by both ethnographic fieldwork and a discrete-choice experiment on Chinese entrepreneurs. This research illuminates how trust can be built absent sufficient support from formal institutions. PubDate: 2024-07-13
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Abstract: Abstract Whether cities can provide critical public services and infrastructure depends on their fiscal health or the ability to pay for different service responsibilities and meet other financial obligations. In this study, we explore a long-simmering controversy in the study of local politics and public finance: does mayoral partisanship matter for city fiscal health' To answer this question, we use audited financial data from 2004 to 2016 for U.S. municipalities with a population of 50,000 or more to measure a critical dimension of fiscal health, which is budgetary solvency. Employing difference-in-differences regression with staggered treatment adoption, our findings reveal that cities switching from a Democratic to a Republican mayor experience improvements in budgetary solvency. However, the effect does not last and dissipates as the next election approaches, indicating the existence of a political fiscal health cycle. The effects of partisanship are more evident when elections are not competitive. We also find that Republican mayors in mayor-council cities exhibit better budget outcomes than Republican mayors in council-manager cities. PubDate: 2024-07-13
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Abstract: Abstract Research has pointed towards U.S. state officials setting COVID regulations based on their constituents’ political affiliation. But a further explanation is needed as prior to 2020, U.S. voters did not choose their political party in accord with how they thought politicians would act in a pandemic. In contrast, other papers have found that people with higher risk preferences took fewer mitigating actions during COVID. Building on these results and the public choice view that political markets lack a dynamic-feedback process, this paper hypothesizes that upcoming elections incentivized state officials to partially set regulations in congruence with their constituents’ demonstrated risk preferences. The hypothesis is tested with a balanced panel of all U.S. states over seven time periods ranging from April until shortly before the 2020 election. A log-linear hybrid model finds a negative relationship between risky actions and the stringency of COVID regulations at the between-state level. The relationship is statistically and regulatorily significant while controlling for relevant time-varying and time-invariant health, political, and economic measures. Multiple robustness tests confirm these results, including instrumenting people’s risky actions. At the within-state level, regulations only varied with changes in revealed risk preferences when governors faced impending feedback from a reelection contest. Republican governors running for reelection decreased regulations when revealed risk taking increased whereas their Democratic counterparts responded by increasing regulations. In states without a gubernatorial election, regulations show little responsiveness to changes in risk taking, corroborating the public choice viewpoint. PubDate: 2024-07-12
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Abstract: Abstract This paper studies the relationship between the size of a jurisdiction and how corrupt its citizens perceive officials to be. The relationship may a priori be driven by four distinct mechanisms: (i) larger communities have more officials, thereby making it more likely at least one official is corrupt; (ii) larger communities have a larger budget, thereby offering more opportunity for corruption; (iii) monitoring officials is costlier in larger communities; and (iv) the public is less likely to have contact with officials in larger communities, which raises citizens’ suspicion. First, using cross-country analysis, we establish that people perceive more corruption in countries with larger populations. We then test this stylized fact using French survey data on the perception of municipal government corruption. We again observe that the perception of corruption increases with population size. This result is robust to a series of checks and many confounding factors. Moreover, our results hold across two distinct periods and for another administrative unit, departments. Finally, we report suggestive evidence that the stylized fact is driven by mechanisms (i) and (ii), but not by (iii) and (iv). PubDate: 2024-07-08
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Abstract: Abstract Authoritarian populism has become an increasingly prevalent subtype of hybrid regime and is characterized by weakened democratic institutions and a leader who relies on populist appeals. Authoritarian populist regimes limit citizens’ freedom, undermine accountability and the rule of law, and are likely to be more corrupt than democratic regimes. Nevertheless, certain authoritarian populist regimes appear to enjoy broad popular support. Based on the European Social Survey database and my calculations of respondents’ personal income tax rates, I investigate the factors that influenced voters’ support for Viktor Orbán’s government in Hungary from 2010 to 2020, which may be considered an exemplary case of an autocratic populist regime. The analysis shows that voters’ support for the government was influenced by their perceptions of the economy and government performance, political beliefs (i.e., policy congruence and ideology), and basic human values (i.e., self-transcendence and conservation). By contrast, changes in voters’ individual economic conditions were not found to be associated with their support for the government. The findings indicate that, in addition to explanations of government support that specifically focus on hybrid regimes, economic voting theory, which originated from and has typically been applied in democratic contexts, also provides viable explanations for understanding support for authoritarian populist regimes. More broadly, the findings also lend support to the altruistic and expressive voter hypotheses. PubDate: 2024-07-08
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Abstract: Abstract How do special interests react to an increase in their regulatory burden' In this paper, I use a shock to the regulatory environment by analyzing state-level enforcement of the Clean Air Act during the fracking boom. First, I show that fracking is associated with an increase in state regulatory activities for non-energy-related industries, generating regulatory spillovers to firms unrelated to fracking. Using the fact that fracking had regulatory spillovers to other industries, I use the presence of fracking as an instrument for environmental regulation for non-energy-related firms. I find that increased environmental enforcement is associated with an increase in state campaign contributions going to Republicans, and particularly to legislative races in competitive districts. These results provide some of the first evidence that changes in the regulatory environment can spur private sector mobilization with the potential to affect broader areas of policy through its electoral consequences. PubDate: 2024-07-07
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Abstract: Abstract This article investigates the relationship between the coalitional structure of revolutionary movements and revolutionary outcomes. Noting the chimerical nature of revolutionary coalitions, it introduces readers to the concept of ‘movement split’: the moment in a revolutionary process when, once a regime is overthrown, the revolutionary coalition fractures into ‘radicals’, who seek further, social revolution; and ‘conservatives’ who are satisfied with a limited, political revolution. By means of a comparative historical analysis of the 1789 French Revolution and 2011 Egyptian Revolution, it analyses the role of coalition structure in determining revolutionary outcomes after movement split. In both cases, the distribution of mobilizing capacity between radicals and conservatives was the key factor determining whether each revolutionary movement came to pursue a ‘political’ or ‘social’ revolutionary’ program. Where conservatives retained control over mobilization, advancement of the revolutionary process ended once political revolution was achieved, while when radicals retained control, a process of social revolution was undertaken. Thus, when seeking to anticipate the trajectory of change an emergent revolutionary movement is liable to undertake, it is fruitful to examine whether it is radicals or conservatives who control its principal mobilizing structures. PubDate: 2024-06-27
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Abstract: Abstract This special issue reflects one of the first systematic inquiries into the effects of revolutions on institutional change, a topic previously explored only tangentially across diverse social science domains. It fosters interdisciplinary discourse on revolutionary outcomes among economists, political scientists, sociologists, and economic historians informed by the public choice research program. The issue is divided into two parts, the first of which focuses on regime overthrow and institutional transformation and the second of which focuses on rational-choice theoretic analyses of revolution and its results. By employing analytical narratives and comparative analyses of contemporary and historical revolutions, the issue advances both theoretical and empirical understandings of revolution, revolutionary dynamics, and their implications. PubDate: 2024-06-25
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Abstract: Abstract As technology-assisted decision-making is becoming more widespread, it is important to understand how the algorithmic nature of the decision maker affects how decisions are perceived by those affected. We use an online experiment to study the preference for human or algorithmic decision makers in redistributive decisions. In particular, we consider whether an algorithmic decision maker will be preferred because of its impartiality. Contrary to previous findings, the majority of participants (over 60%) prefer the algorithm as a decision maker over a human—but this is not driven by concerns over biased decisions. However, despite this preference, the decisions made by humans are regarded more favorably. Subjective ratings of the decisions are mainly driven by participants’ own material interests and fairness ideals. Participants tolerate any explainable deviation between the actual decision and their ideals but react very strongly and negatively to redistribution decisions that are not consistent with any fairness principles. PubDate: 2024-06-20
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Abstract: Abstract We apply tournament theory to congressional leadership to unify research on campaign finance with theories of endogenous party strength. Parties want to incentivize members to do costly work for the benefit of the party, such as fundraising. Accordingly, they make leadership offices attractive and award these leadership offices on the basis of who does the most work for the party. The more attractive the leadership office becomes, the harder party members work to win. We present a model to formalize this argument, derive its empirical implications, and find support for these implications using data from committee assignments, committee authorizations, and fundraising for leadership political action committees and congressional hill committees. PubDate: 2024-06-17 DOI: 10.1007/s11127-024-01184-y
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Abstract: Abstract This paper introduces the special issue on complex externalities and public choice. The collection of essays extends analytical bridges between public choice, property rights economics, and new institutional economics. The essays question many of our prevailing assumptions behind the standard conceptualization of externalities. They also offer pragmatic and theoretical alternatives and apply these insights to analyze radio spectrum, environmental pollution, intellectual property, and public health issues. These essays demonstrate the ongoing significance of public choice in addressing society’s most pressing challenges. PubDate: 2024-06-13 DOI: 10.1007/s11127-024-01176-y
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Abstract: Abstract The Peloponnesian War, 431–404, between democratic Athens and oligarchic Sparta was a long, destructive war ending with the total surrender of Athens. Scholars of Thucydides, the ancient historian of the conflict, have dwelt on two different explanations of the causes of the War. First, the “Thucydides’ Trap”, which argues that Sparta’s fear of the growing power of Athens rendered peace arrangements non-credible and made war inevitable. Second, the unwise leadership, which blames key political leaders for their erroneous judgments in the affairs of the state. Using the perspective of the economics of conflict the present study questions both views. It argues that the non-credibility of peace is at best an incomplete explanation of the conflict, and the unwise leadership hypothesis requires a systematic account of the factors affecting leaders to choose war. Noting that the clash between Sparta and Athens had started earlier, in 460, the study shows that its causes related to calculations of material and non-material benefits from victory, perceptions of the probability of military success, problems of domestic political accountability, and the valuation of the future. Importantly, it also shows that the role of these factors differed significantly at the different phases of the extended conflict. PubDate: 2024-06-13 DOI: 10.1007/s11127-024-01179-9
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Abstract: Abstract Scholars in the social sciences and humanities play a crucial role in shaping political discourse by conducting research, teaching, and engaging the public. Therefore, autocratic regimes frequently impose restrictions and surveillance on social scientists’ and humanists’ scholarly and teaching activities to ensure alignment with the regime’s political interests. Our study explores how reducing such restrictions, as expected by a transition to democracy (democratization), influences academic knowledge creation and dissemination in these fields. We also investigate if the impact of democratization differs for the STEM fields that tend to benefit from preexisting academic freedom. Using data from SCImago (Scimago journal & country rank, 2021. https://www.scimagojr.com), we use the total number of published documents as knowledge formation and average citations per document as knowledge dissemination metrics across 149 countries from 1996 to 2018. Drawing on the Episodes of the Regime Transformation (ERT) dataset, we find that democratization significantly increases citations per document in the social sciences and humanities, though the results are less robust for the humanities. There is no statistically significant change in the volume of published documents post-democratization in either field, possibly due to the limitations of our metric in capturing non-traditional contributions. This limitation is particularly pronounced in the humanities, where books, rather than articles, serve as the primary scholarly output. Therefore, they fall outside the scope of our knowledge creation metrics, leading to an underestimation of democratization’s impact. We do not find any effect of democratization on our knowledge creation or dissemination metrics in the STEM fields. Our results withstand various checks, including an instrumental variable approach to address potential endogeneity in democratization periods. PubDate: 2024-06-10 DOI: 10.1007/s11127-024-01181-1
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