Constants and Variants in Political Exchange

ABSTRACT: The purpose of this article is to offer some clarification on developments in a number of European countries in the postwar period. The crux of the analysis are the relations between the huge, functional interest-group organizations and the political system and government, and in particular the trade unions. The intent is firstly to overcome the uncertain and often indistinct use of the concepts of political exchange and corporatism, then to offer an explanatory framework in which these modes, which have prevailed in Capitalist countries, can be grouped under the model of political exchange, in so much as the trade unions’representation of interest groups is affected by the factors and political advantages at stake. It then clariries the essential connotations of this model, which can be considered as constants compared to the variants within it, and also deals with the two types of political exchange predominant in the period and countries surveyed, namely pluralist and cor-poratist variants. Finally the author stresses the need for empirical studies in postwar Europe, to check the acceptability and realism of the model used and test the validity of the theses here outlined, that is, that there are several variants — or strategies — of political exchange between trade unions and the governments and political system.     

THE POLITICAL ECONOMY OF FLEXICURITY

We document the presence of a trade‐off in the labor market between the protection of jobs and the support offered to unemployed people. Different countries’ locations along this trade‐off represent stable political‐economic equilibria. We develop a model in which individuals determine the mix of job protection and support for the unemployed in a political environment. Agents are heterogeneous along two dimensions: employment status (insiders and outsiders) and skills (low and high). Unlike previous work on the political economy of labor market institutions, we emphasize the role of job protection and unemployment benefits in the wage‐setting process. A key implication of the model is that flexicurity configurations with low levels of job protection and high levels of support to the unemployed should emerge in the presence of a highly educated workforce. Panel regressions of countries’ locations along this institutional trade‐off are consistent with the implications of our model.     

Tolerable or Acceptable: A Comparison of Risk Regulation in the United Kingdom and in the Netherlands

In managing major accident hazards in industry risk, both the United Kingdom and the Netherlands use quantitative risk analysis and quantified risk criteria. These should be understood in the historical, legal, and political context in which they were drawn up. Even when criteria are numerically the same they do not necessarily mean the same thing. The legal and historical context differs widely between the two countries. Nevertheless, it is surprising that the final results in terms of land use and levels of risk are very similar.     

WHICH SECTORS MAKE POOR COUNTRIES SO UNPRODUCTIVE?

Which sectors are most responsible for the low total factor productivities of developing countries? To answer this question we develop a new framework for sectoral development accounting. Applying this framework to the Penn World Table, we find that in equipment, construction, and food the sectoral TFP differences between developing countries and the United States are much larger than in the aggregate. However, in manufactured consumption the sectoral TFP differences are about equal to the aggregate TFP differences, and in services they are much smaller. We show that our level of disaggregation allows us to reconcile the results of existing studies of sectoral productivity differences, which have focused on noncomparable two‐sector decompositions of the aggregate data. We also show that our results help shed light on existing theories of aggregate TFP differences.     

COMMON COMPONENTS OF RISK AND UNCERTAINTY ATTITUDES ACROSS CONTEXTS AND DOMAINS: EVIDENCE FROM 30 COUNTRIES

Attitudes towards risk and uncertainty have been indicated to be highly context‐dependent, and to be sensitive to the measurement technique employed. We present data collected in controlled experiments with 2,939 subjects in 30 countries measuring risk and uncertainty attitudes through incentivized measures as well as survey questions. Our data show clearly that measures correlate not only within decision contexts or measurement methods, but also across contexts and methods. This points to the existence of one underlying “risk preference”, which influences attitudes independently of the measurement method or choice domain. We furthermore find that answers to a general and a financial survey question correlate with incentivized lottery choices in most countries. Incentivized and survey measures also correlate significantly between countries. This opens the possibility to conduct cultural comparisons on risk attitudes using survey instruments.     

Land Use Regulation and Welfare

We evaluate the effect of land use regulation on the value of land and on welfare. Our estimates are based on a decomposition of the effects of regulation into three components: an own‐lot effect, which reflects the cost of regulatory constraints to the owner of a parcel; an external effect, which reflects the value of regulatory constraints on one's neighbors; a supply effect, which reflects the effect of regulated scarcity of developable land. Using this decomposition, we arrive at a novel strategy for estimating a plausibly causal effect of land use regulation on land value and welfare. This strategy exploits cross‐border changes in development, prices, and regulation in regions near municipal borders. Our estimates suggest large negative effects of regulation on the value of land and welfare in these regions.     

KNOWING THE RIGHT PERSON IN THE RIGHT PLACE: POLITICAL CONNECTIONS AND RESISTANCE TO CHANGE

We use a political economy model of Schumpeterian growth with entry to investigate how an incumbent politician can strategically use the level of red tape to acquire incumbency advantage. By setting sufficiently high red tape, the politician induces the incumbent firm in the intermediate sector to invest in political connections, which are valued also by voters, who recognize that bureaucratic costs can be reduced by connected firms. Within this framework, we study the Markov perfect equilibria of an infinitely repeated game among politicians, firms, and voters, and show that all equilibria are characterized by investments in political connections and the re‐election of the incumbent politician. Political connections may prevent entry of advanced competitors and cause the economy to lag behind the technological frontier. Our model provides a possible explanation for the persistence of inefficient democracies and political barriers to technology development, where these reflect shared rather than conflicting interests.     

When conflict fuels negativity. A large-scale comparative investigation of the contextual drivers of negative campaigning in elections worldwide

We investigate the contextual conditions under which campaigns in elections worldwide are fought “negatively”, that is, rely on attacks against political opponents. We test the overarching intuition that societal, political, and cultural conflicts in the country are associated with greater negativity in election campaigns; conflicts, we argue, sow political discord. We test this intuition via a large-scale comparative dataset that covers 136 national elections across more than 100 countries worldwide that happened between June 2016 and March 2020, based on the expert judgments of more than 2000 scholars - to the best of our knowledge, the single largest comparative dataset about the content of elections worldwide. Our results show that countries in which elections are fought under a majoritarian or plurality rule tend to witness higher campaign negativity, and so are countries characterized by higher income inequality, deeper ethnic fragmentation, and higher individualism. Similarly, election competitiveness and ideological diversity of competing actors both tend to be associated with a greater use of negative campaigning, and so is news media preference for sensationalism.     

An Evaluation of the Capacity-building Effects of Participatory GIS (PGIS) for Public Participation in Land Use Planning

Spatial participatory methods called ‘participatory GIS’ (PGIS) are intended to improve public participation for land use planning. An internet PGIS was implemented in Perlis, Malaysia, to examine the public capacity-building effects of PGIS. Two delivery modes (facilitated and self-administered) were evaluated. We found that PGIS significantly enhanced perceived public knowledge about place and land use planning while increasing spatial technology skills, regardless of implementation mode. The results indicate that PGIS can increase public capacity for participating in land use planning, an important finding for developing countries with historically low levels of public participation and low public awareness and knowledge of planning.     

AN INTERNATIONAL COMPARISON OF LIFETIME INEQUALITY: HOW CONTINENTAL EUROPE RESEMBLES NORTH AMERICA

We compare earnings inequality and mobility across the United States, Canada, France, Germany and the United Kingdom during the late 1990s. A flexible model of earnings dynamics that isolates positional mobility within a stable earnings distribution is estimated. Earnings trajectories are then simulated, and lifetime annuity value distributions are constructed. Earnings mobility and employment risk are found to be positively correlated with base‐year inequality. Taken together they produce more equalization in countries with high cross‐section inequality such that the countries in our sample have more similar lifetime inequality levels than cross‐section measures suggest.     

Measuring Organizational Performance: A Case for Subjective Measures

We review the organizational performance (OP) measurement literature highlighting the limitations of both objective and subjective measures of performance. We argue that, with careful planning, subjective measures can be successfully employed to assess OP. This is because often consistent, reliable and comparable compatible objective data on OP measures – particularly across countries and sectors – is difficult to come by. Considering that an inflated OP measure can be cross‐checked with the use of secondary data, managers have little incentive to report such figures. As a result, when quizzed over the stand‐alone performance measures of their organizations or vis‐à‐vis their rivals, managers accurately assess and respond to questions on the performance of their organizations. An in‐depth statistical exercise conducted on the subjective measures of OP as reported by managers of four sets of companies in four separate countries, show consistent results, thus lending support to this premise.     

The Prioritization of Island Nations as Refuges from Extreme Pandemics

In this conceptual article with illustrative data, we suggest that it is useful to rank island nations as potential refuges for ensuring long-term human survival in the face of catastrophic pandemics (or other relevant existential threats). Prioritization could identify the several island nations that are most suitable for targeting social and political preparations and further investment in resiliency. We outline a prioritization methodology and as an initial demonstration, we then provide example rankings by considering 20 sovereign island states (all with populations greater than 250,000 and no land borders). Results describe each nation in nine resilience-relevant domains covering location, population, resources, and society according to published data. The results indicate that the most suitable island nations for refuge status are Australia, followed closely by New Zealand, and then Iceland, with other nations all well behind (including the relatively high-income ones of Malta and Japan). Nevertheless, some key contextual factors remain relatively unexplored. These include the capacity of the jurisdiction to rapidly close its borders when the emerging threat was first detected elsewhere, and whether or not large subnational islands should be the preferred focus for refuge design (e.g., the Australian state of Tasmania, the island of Hokkaido in Japan, or the South Island of New Zealand). Overall, this work provides conceptual thinking with some initial example analysis. Further research could refine the selection of metrics, how best to weight the relevant domains, and how the populations of prioritized island nations view their nation's selection as a potential refuge for human survival.     

SOVEREIGNS,UPSTREAM CAPITAL FLOWS,AND GLOBAL IMBALANCES

We construct measures of net private and public capital flows for a large cross‐section of developing countries considering both creditor and debtor side of the international debt transactions. Using these measures, we demonstrate that sovereign‐to‐sovereign transactions account for upstream capital flows and global imbalances. Specifically, we find that (i) international net private capital flows (inflows minus outflows of private capital) are positively correlated with countries' productivity growth, (ii) net sovereign debt flows (government borrowing minus reserves) are negatively correlated with growth only if net public debt is financed by another sovereign, (iii) net public debt financed by private creditors is positively correlated with growth, (iv) public savings are strongly positively correlated with growth, whereas correlation between private savings and growth is flat and statistically insignificant. These empirical facts contradict the conventional wisdom and constitute a challenge for the existing theories on upstream capital flows and global imbalances.     

ECONOMIC INTEGRATION,POLITICAL INTEGRATION OR BOTH?

We study the effects of economic and political integration by presenting a model in which firms compete with each other in both an economic market—where they produce a good and compete for market share—and in a political (rent seeking) market—where they compete for transfers from the government. Growth is driven by firms’ cost‐reducing innovation activity and economic and political integration affect firms’ incentive to innovate differently. In this setting, economic and political integration can be seen as complementary. Economic integration, when not accompanied by political integration, can lead to less innovation and slower growth as firms respond to increased competition in the economic market by focusing more on rent‐seeking activity. When economic integration is accompanied by political integration, innovation and growth will be stronger and welfare higher.     

MADE IN THE WORLD: THE GLOBAL SPREAD OF PRODUCTION

We are moving rapidly into an age of transnational manufacturing, where things made in one country are shipped across national borders for further work, storage, sales, repair, remanufacture, recycle, or disposal; but our laws, policies, and management practices are slow in adjusting to this reality. They are often based on inaccurate premises. This article examines these premises and suggests what they imply for management of manufacturing. First, a common view is that manufacturing investment in the industrialized nations is declining and shifting to the developing countries. This is not true. Investment in manufacturing in both industrialized and developing nations is increasing and, in absolute value, there is a lot more investment in industrialized countries than in developing countries. Second, a related view argued by many is that manufacturing does not have a bright future in the rich countries. I argue that manufacturers can thrive in the industrialized countries if they learn how to add more value for the end users. They must go beyond productivity improvement to producing more technologically advanced and customized products, responding faster to changing customer demands, and appending more services to their products. Doing all this is easier in the industrialized countries because the needed skills and infrastructure are more readily available there. Third, another potentially misleading notion is related to why companies invest in manufacturing abroad. Access to low-cost production is not the main motivation in most cases; rather it is access to market. Superior global manufacturers use their foreign factories for much more: to serve their worldwide customers better, preempt competitors, work with sophisticated suppliers, collect critical marketing, technological, and competitive intelligence, and attract talented individuals into the company. They build integrated global production networks, not collections of disjointed factories that are spread internationally. Thus their investment in manufacturing abroad is not a substitute for investment at home, it is a complement. Building and managing such integrated global factor networks is the next challenge in manufacturing.     

POLITICAL SELECTION IN CHINA: THE COMPLEMENTARY ROLES OF CONNECTIONS AND PERFORMANCE

Who becomes a top politician in China? We focus on provincial leaders—a pool of candidates for top political office—and examine how their chances of promotion depend on their performance in office and connections with top politicians. Our empirical analysis, based on the curriculum vitae of Chinese politicians, shows that connections and performance are complements in the Chinese political selection process. This complementarity is stronger the younger provincial leaders are relative to their connected top leaders. To provide one plausible interpretation of these empirical findings, we propose a simple theory in which the complementarity arises because connections foster loyalty of junior officials to senior ones, thereby allowing incumbent top politicians to select competent provincial leaders without risking being ousted. Our findings shed some light on why a political system known for patronage can still select competent leaders.     

QUALITY LADDERS IN A RICARDIAN MODEL OF TRADE WITH NONHOMOTHETIC PREFERENCES

The North–South trade literature has traditionally explored conditions under which international trade might further magnify income disparities between the advanced North and the backward South. We show that even when no single country is initially more advanced than any other one and productivity changes are uniform and identical in all countries, trade may still be a source of income divergence when nonhomothetic preferences and quality ladders are jointly taken into account. Income divergence will be experienced when comparative advantages induce patterns of specialization that, although initially optimal for all countries, do not offer the same scope for quality upgrading of final products.     

FAMILY TIES AND POLITICAL PARTICIPATION

We establish an inverse relationship between family ties and political participation, such that the more individuals rely on the family as a provider of services, insurance, and transfer of resources, the lower is one's civic engagement and political participation. We also show that strong family ties appear to be a substitute for generalized trust, rather than a complement to it. These three constructs—civic engagement, political participation, and trust—are part of what is known as social capital; therefore, in this paper, we contribute to the investigation of the origin and evolution of social capital. We establish these results using within‐country evidence and looking at the behavior of immigrants from various countries in 32 different destination places.     

CONTROL RIGHTS IN COMPLEX PARTNERSHIPS

This paper develops a theory of the allocation of authority between two players who are in a complex partnership, that is, a partnership which produces impure public goods. We show that the optimal allocation depends on technological factors, the parties’ valuations of the goods produced, and the degree of impurity of these goods. When the degree of impurity is large, control rights should be given to the main investor, irrespective of preference considerations. There are some situations in which this allocation is optimal even if the degree of impurity is very low as long as one party’s investment is more important than the other party’s. If the parties’ investments are of similar importance and the degree of impurity is large, shared authority is optimal with a greater share going to the low‐valuation party. If the importance of the parties’ investments is similar but the degree of impurity is neither large nor small, the low‐valuation party should receive sole authority. We analyze an extension in which side payments are infeasible. We check for robustness of our results in several dimensions, such as allowing for multiple parties or for joint authority, and apply our results to interpret a number of complex partnerships, including those involving schools and child custody.     

Income Distribution,Public Expenditure and Equality

Abstract. The increased role of public expenditure in industrialised countries involves new theoretical and empirical problems: general equilibrium models must be fully accommodated with the structural presence of the public sector and at the same time we need a better understanding of the redistributive impact of non-market rules. Therefore we suggest looking at our economies as a resource allocation mechanism. in which a Walrasian mechanism (without auctioneer) interacts with a political mechanism: we suggest that ex post resource equality is the driving force behind the increasing role of the public sector, and therefore it is also the crucial test against which to evaluate the impact of public expenditure. A stylised way to look at our economies therefore can be as follows: ex ante equality is the domain of market, whilst ex post equality is the domain of the public sector. This approach is compared with cross-section data of 16 countries and more detailed data, both cross-section and time-series, for the case of Italy: empirical results suggest that ex post equality is not a clearcut target, but rather it arises as the net outcome of contrasting forcas.