A THEORY OF THE CORRUPT KEYNESIAN

AbstractWe evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We find that corruption is pro-cyclical and regulation policy is counter-cyclical. Corrupt politicians engage in excessive stabilization of aggregate fluctuations and behave as if they were Keynesian. We also find that business cycle shocks can induce political instability with politicians losing office in recessions

Corruption and Sustainable Development

This paper studies the relationship between corruption and sustainable development in a sample of 110 countries between 1996 and 2007. Sustainability is measured by growth in genuine wealth per capita. The empirical analysis consistently finds that cross-national measures of perceived and experienced corruption reduce growth in genuine wealth per capita. In contrast to the evidence on the relationship between corruption and growth in GDP per capita, the negative correlation between a wide range of different corruption indices and growth in genuine wealth per capita is very robust and is of economic as well as of statistical significance. We relate the finding to the literature on the resource curse and demonstrate that rampant corruption can put an economy on an unsustainable path along which its capital base is being eroded

Rent seeking and the economics of corruption

The paper studies the influence of Tullock (West Econ J 5:224–232, 1967) and the rent-seeking literature more generally on the study of corruption. The theoretical corruption literature with its emphasis on principal-agent relationships within government and rent creation by corruption politicians has largely, but not entirely, overlooked that contestable rents encourage unproductive use of real resources in seeking these rents. As a consequence, the literature underestimates the value of corruption control and the cost of corruption itself.This is the final version of the article. It first appeared from Springer via https://doi.org/10.1007/s10602-016-9215-

Workers of the world, unite! Franchise extensions and the threat of revolution in Europe, 1820–1938

This is the author accepted manuscript. The final version is available from Elsevier via http://dx.doi.org/10.1016/j.euroecorev.2014.08.001We test the hypothesis that the extension of the voting franchise in Europe was related to the threat of revolution. We contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution. Using two samples of European countries covering the period from 1820 to 1938, we find robust evidence which is consistent with the ‘threat of revolution hypothesis’. We also find some evidence that war triggered suffrage reform

From Open to Secret Ballot: Vote Buying and Modernization

The secret ballot is one of the cornerstones of democracy. We contend that the historical process of modernization caused the switch from open to secret ballot with the underlying mechanism being that income growth, urbanization, and rising education standards undermined vote markets. We undertake event history studies of ballot reform in Western Europe and the U.S. states during the 19th and 20th centuries to establish that modernization was systematically related to ballot reform. We study electoral turnout before and after ballot reform among the U.S. states and British parliamentary constituencies to substantiate the hypothesis that modernization reduced the volume of trade in the vote market.This paper was partly written while Toke Aidt was visiting the Institute for Quantitative Social Science at Harvard University and, subsequently, the CESifo in Munich. The hospitality of these institutes is much appreciated. The paper was presented at the 2nd World Congress of the Public Choice Society and European Public Choice Society in Miami in March 2012. The usual qualifier applies.This is the author accepted manuscript. The final version is available from Sage via http://dx.doi.org/10.1177/001041401662826

Election results and opportunistic policies: A new test of the rational political business cycle model

The literature on the rational political business cycle suggests that politicians systematically manipulate economic and fiscal conditions before elections to increase their chance of gaining reelection. Most tests of this theory look for evidence of pre- election distortions in fiscal policy. We propose a new test that, instead, explores the implied two-way interaction between the magnitude of the opportunistic distortion and the margin of victory. The test is implemented using a panel of 278 Portuguese municipalities (from 1979 to 2005). The results show that (1) opportunism pays off, leading to a larger win-margin for the incumbent; (2) incumbents behave more opportunistically when their win-margin is small. These results are consistent with the theoretical model

Democratization under the threat of revolution: Evidence from the great reform act of 1832

We examine the link between the threat of violence and democratization in the context of the Great Reform Act passed by the British Parliament in 1832. We geo-reference the so-called Swing riots, which occurred between the 1830 and 1831 parliamentary elections, and compute the number of these riots that happened within a 10 km radius of the 244 English constituencies. Our empirical analysis relates this constituency-specific measure of the threat perceptions held by the 344,000 voters in the Unreformed Parliament to the share of seats won in each constituency by pro-reform politicians in 1831. We find that the Swing riots induced voters to vote for pro-reform politicians after experiencing first-hand the violence of the riots.Toke Aidt thanks the Institute for Quantitative Social Science at Harvard University for the hospitality during the initial stages of this project. Raphaël Franck gratefully acknowledges financial support from the Adar Foundation of the Economics Department at Bar Ilan University. Raphaël Franck wrote part of this paper as Marie Curie Fellow at the Department of Economics at Brown University under funding from the People Programme (Marie Curie Actions) of the European Union's Seventh Framework Programme (FP 2007-2013) under REA grant agreement PIOF-GA-2012-327760 (TCDOFT). We are also grateful to the Cambridge Group for the History of Population and Social Structure and the ESRC (Grant RES-000-23-1579) for helping us with shape files for the maps of the ancient counties and parishes. We thank Todd Elder and Olmo Silva for sharing their code as well as John Bohstedt and Andrew Reeves for sharing their data with us. The research was supported by the British Academy (grant JHAG097).This is the author accepted manuscript. The final version is available from Wiley via http://dx.doi.org/10.3982/ECTA1148

What motivates an oligarchic elite to democratize? Evidence from the roll call vote on the great reform act of 1832

AbstractThe Great Reform Act of 1832 was a watershed for democracy in Great Britain. We study the vote on 22 March 1831 in the House of Commons to test three competing theories of democratization: public opinion, political expedience, and threat of revolution. Peaceful agitation and mass-support for reform played an important role. Political expedience also motivated some members of Parliament to support the reform, especially if they were elected in constituencies located in counties that would gain seats. Violent unrest in urban but not in rural areas had some influence on the members of Parliament. Counterfactual scenarios suggest that the reform bill would not have obtained a majority in the House of Commons in the absence of these factors.British Academy/Leverhulme Small Research Grant (SG121870

Fiscal Federalism and Electoral Accountability

We evaluate how governance uncertainty ñexempliÖed by turnout uncertainty - affects the trade off between internalization of externalities and political accountability in the design of the fiscal state. We show that centralization only weakens political accountability in the presence of negative externalities. Unlike positive externalities, negative externalities allow federal politicians to extract higher rents. This yields two new insights. First, decentralization can only Pareto dominate centralization in economies with negative externalities. Second, centralization may not be Pareto efficient in economies with positive externalities despite the fact that pol- icy can be tailored to regional taste differences and centralization internalizes the positive externality.This research was supported by a grant from the Barcelona Institute of Economics (IEB) under its research programme in Fiscal Federalism

Foreign influence and domestic policy

In an interconnected world, economic and political interests inevitably reach beyond national borders. Since policy choices generate external economic and political costs, foreign state and non-state actors have an interest in influencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes three principal forms: (i) voluntary agreements, (ii) policy interventions based on rewarding or sanctioning the target country to obtain a specific change in policy, and (iii) institution interventions aimed at influencing the political institutions in the target country. We propose a unifying theoretical framework to study when foreign influence is chosen and in which form, and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines (JEL D72, D74, F51, F53, P26, P33).</jats:p