Political Costs Research Articles

The nexus of political connections and corporate tax strategies in Pakistan

PurposeExtant literature investigating the tax payment behaviour of politically connected firms largely supports the notion that politically connected firms have tax sheltering incentives, i.e. politically connected firms pay significantly less tax. Our paper adds to this stream of literature by considering the tax payment behaviour of two different groups of politically connected firms in Pakistan, viz. civil connected firms and military connected firms.Design/methodology/approachThe paper sheds light on the tax payment behaviour of politically connected firms and provides evidence that the tax incentives of politically connected firms are shaped by the institutional structure and contextual factors.FindingsThe results indicate that civil (military) connected firms pay significantly lower (higher) tax than non-connected firms. The findings hold in the face of a number of robustness tests, including the use of alternative proxies for the tax variable and endogeneity concerns.Originality/valueThese results make a significant contribution to the existing literature examining the tax payment behaviour of politically connected firms by providing evidence suggesting that tax sheltering is not the only viable option for politically connected firms; rather, some groups of connected firms have tax under-sheltering incentives. Our findings add to the political cost hypothesis and the signalling hypothesis in relation to tax payment incentives of politically connected firms.

The High Cost of Politics in Indonesia: An Exploration of Multi-perspectives from Academics, Students, Executive Officials, and Legislative Candidates

The issue of high electoral political costs in Indonesia has been a serious concern since the 1998 reforms. This study aims to explore the factors that contribute to the high political costs in Indonesia’s democratic electoral system. The research question posed is: “What are the factors that lead to high political costs in Indonesia’s democratic electoral system?” The study employs a qualitative method with an in-depth interview approach. The informants for this study included academics, students, executive officials, and legislative candidates, selected to explore perspectives from various levels of society and the state. The selection of these informants was based on their diverse backgrounds, which were considered capable of providing comprehensive views on this issue. The findings reveal that the high cost of politics is caused by several factors, including an unusual electoral system, a paradigm shift in political parties, the prioritization of popularity over competence, campaign finance sponsorship, payback politics, and the phenomenon of “dawn raids.” The conclusion of this study indicates that the high cost of politics is a complex problem that requires a cross-sectoral approach to find a solution. The implication of this study is the importance of a deeper analysis of the mechanisms of political financing and their impact on democracy in Indonesia. This study makes an important contribution to understanding and addressing the problem of electoral political costs in Indonesia and emphasizes the need for cross-sectoral cooperation to achieve sustainable solutions.

Money Politics in a Democratic Political System: A Case study of South Korea and European Countries

The issue of money politics in Indonesia has severely undermined democratic integrity, affecting equality in political participation, increasing the risk of corruption, creating disparities in political access, influencing public policy-making, and damaging public perceptions of the political system’s credibility. This study aimed to explore how other countries address the challenges of money politics and offered concrete solutions to strengthen democratic integrity. Using a comparative approach, the study examined money politics policies and practices, as well as assessed the effectiveness of anti-corruption and transparency measures in South Korea and Europe. The findings revealed that strict regulations on campaign financing and oversight by independent bodies have effectively mitigated money politics practices in these countries. Consequently, Indonesia is encouraged to adopt a similar approach by establishing an independent oversight body and fostering active public participation to address the challenges of money politics and high political costs, promote equitable political participation, and strengthen democratic integrity.

Informal governance and transnational access in world politics

AbstractThe governance turn in political research has led to increased attention to informal institutions. For scholars of international relations this has contributed to recent scholarship that reveals a notable growth in the number of informal intergovernmental organizations (IIGOs). Many aspects of IIGOs remain unknown, including whether they involve transnational actors (TNAs). Yet, whether IIGOs are open to TNAs or not may affect their performance and legitimacy. Given the importance of TNA access to IIGOs, this article explores IIGOs openness to TNAs. We illustrate that IIGOs vary whether they are open or not and that arrangements for TNA access differ. Theoretically, we build on existing literature to posit that the political costs of involvement, TNA resources, and the institutional environment affect whether IIGO are open or closed to TNAs. Empirically, we present new data on TNA access to 94 IIGOs and examine the variation in IIGO openness to explore the validity of our theoretical expectations. We find that no single account can be offered to understand access across IIGOs, and our explanatory factors show variegated effects across different subgroups of the sample. Our findings have implications for debates on the rise of informal global governance and the openness of global governance.

The Domestic Political Costs of Soliciting Foreign Electoral Intervention

The Domestic Political Costs of Soliciting Foreign Electoral Intervention

Does land expropriation to neighbors affect the enrollment of bystanders in pension programs?

Land expropriation can incur not only economic costs but also political costs. Using panel data from the China Family Panel Studies (CFPS), we investigate the impact of land expropriation on the compliance behaviors of rural residents for the New Rural Pension Scheme (NRPS), which is an extremely important public policy led by the government in China. To exclude the potential confounding impacts of reduced social security levels resulting from land expropriation, we focus on farmers in the same village who have not suffered land expropriation. The results of the difference-in-differences (DID) regression model suggest that land expropriation significantly reduces the probability of farmers within the same village, who have not suffered land expropriation, enrolling in the NRPS. The primary reasons are that land expropriation significantly decreases the trust of non-land expropriated farmers in local officials and the NRPS. Additionally, land expropriation has a stronger impact on unexpropriated farmers with lower levels of education, as well as unexpropriated households without Communist Party of China membership or with a high level of dependence on agriculture. Our findings suggest the cost of land expropriation is larger than previously thought, as it generates broader political trust and policy compliance issues.

Does environmental information disclosure regulation improve environmental governance? Evidence from China

This study examines the effectiveness of Chinese environmental information disclosure (EID) regulations. We find that EID regulations improve firms' EID quality (i.e., exist information effect) and foster firms' green behavior (i.e., exist green effect). Mechanism analysis shows that due to lower audit risks, heavy-polluting firms are charged lower audit fees after the implementation of EID regulations; and due to less managerial myopia, heavy-polluting firms significantly increase green investment and green innovation following EID regulations. Additional heterogeneity analysis shows that these information and green effects can be strengthened by institutional environment factors, such as media coverage, audit quality and political cost.

Why Local Governments Set Climate Targets: Effects of City Size and Political Costs

AbstractCities increasingly address climate change, e.g. by pledging city-level emission reduction targets. This is puzzling for the provision of a global public good: what are city governments’ reasons for doing so, and do pledges actually translate into emission reductions? Empirical studies have found a set of common factors which relate to these questions, but also mixed evidence. What is still pending is a theoretical framework to explain those findings and gaps. This paper thus develops a theoretical public choice model. It features economies of scale and distinguishes urban reduction targets from actual emission reductions. The model is able to explain the presence of targets and public good provision, yet only under specified conditions. It is also able to support some stylized facts from the empirical literature, e.g. on the effect of city size, and resolves some mixed evidence as special cases. Larger cities chose more ambitious targets if marginal net benefits of mitigation rise with city size—if they set targets at all. Whether target setting is more likely for larger cities depends on the city type. Two types are obtained. The first type reduces more emissions than a free-riding city. Those cities are more likely to set a target when they are larger. However, they miss the self-chosen target. Cities of the second type reach their target, but mitigate less than a free-riding city. A third type does not exist. With its special cases, the model can thus guide further empirical and theoretical work.

Drafting restraint: Are military recruitment policies associated with interstate conflict initiation?

Are countries that use conscription more restrained in their use of military force? A common argument holds that military conscription restrains leaders from using force because it increases the political cost of war and distributes them more evenly and broadly across the population. Despite this intuition, empirical evidence to support it is at best inconclusive. This article introduces a novel perspective on the relationship between military recruitment (MR) policies and conflict initiation (CI) by arguing that the military’s size relative to society – its military participation rate (MPR) – is an important and overlooked part of this story. MPR is a more direct measure of the population’s exposure to the costs of war, but high MPR may also increase CI by enhancing military capacity. By incorporating MPR into the analysis of CI, both independently and in interaction with conscription, this article provides a more comprehensive understanding of how MR practices shape CI. It tests these new hypotheses about the relationship between MPR, conscription and CI using a variety of time-series models that cover all country-years from 1816 to 2011. The findings do not support the conventional wisdom, instead revealing that neither conscription nor volunteerism is independently associated with restrained initiation of military conflicts abroad. On the contrary, these recruitment practices are more likely to be associated with an increase in the likelihood of CI. These findings indicate that we should be skeptical of traditional arguments that assume conscription leads to restraint in the use of force, either independently or conditional on MPR. These counterintuitive results underscore the need for additional research on the complex relationship between MR practices, civil–military relations and foreign policy.

The price of politics: What the 2020 oil shocks in Nigeria teach us about transactional political systems

Political spending—funds that elite actors use to buy and sell political power—is the lifeblood of Nigerian politics. It fuels backroom deals, forges political coalitions, and is the means to incite or end violence. To date, political spending in Nigeria has largely been financed by its immense oil revenues flowing through the government. It is natural to assume that political budgets should rise and fall with oil’s boom-and-bust cycles, but the reality is not so straightforward. Based on an analysis of the 2020 oil crash in Nigeria, this paper examines how traumatic decarbonization—the sudden, unplanned loss of oil revenues—did not lead to a reduction in political budgets but did force a change in how they were funded and channeled. Despite the loss in oil revenues, patronage and the “contractocracy,” government contracts used to funnel rents to the elite, were protected and expanded massively in 2021 with funding from domestic and international loans. The 2020 oil crash demonstrated the resilience and rising cost of transactional politics in Nigeria, even when it came at the expense of the Nigerian people. Through this analysis, the paper further examines systemically corrupt political systems and how political actors adapt to changes in available political finance.

Mitigating the Political Cost of Financial Crisis with Blame Avoidance Discourse: The Case of Turkey

How do centralized governments mitigate the political cost of severe financial crises? The economic voting scholarship has established that the clarity of responsibility, i.e., government accountability for economic conditions to the mass public, is a necessity for electoral reward or punishment for economic performance. On the one hand, political centralization, which reduces the number of veto players, may increase the visibility of the role of the executive in policy success or failure. On the other hand, it allows an uncontested blame avoidance discourse, especially when accompanied with democratic backsliding. Furthermore, the recent backlash against globalization has enabled blame shifting to international actors in many countries. Against this theoretical framework, we comparatively analyze the responsibility attribution discourses for the 1994, 2001, and 2018-2022 financial crises in the statements of incumbent presidents, ministers, and parliament members of Turkey. We find that while blame avoidance discursive strategies have been attempted in all three cases, the responsibility attribution for the 1994 and 2001 crises mostly targeted the executive. In contrast, for the ongoing crisis, the responsibility discourse is dominated with blaming international political economy factors, creating ambiguity, and targeting domestic non-governmental actors.

Powerful Politicians, Political Costs, and Income Smoothing

ABSTRACT This paper investigates whether and how firms receiving benefits through their connections to politicians use accounting discretion to mitigate the costs associated with negative publicity. I utilize a unique setting that captures the change in political costs arising from chairmanship appointments to influential U.S. Senate committees. Firms in the home state of a promoted officeholder often receive preferential treatment, drawing public scrutiny and incentivizing them to avoid reporting extreme earnings through income smoothing to reduce adverse political attention. Employing a difference-in-differences research design, I find evidence that home-state firms smooth their earnings throughout the officeholder’s tenure following a senator’s promotion to chairman or ranking minority member. Cross-sectional analyses demonstrate that these effects are stronger for firms anticipating higher political costs. Overall, this paper provides evidence of the political cost hypothesis, highlighting the role of political connections in shaping firms’ financial reporting strategies. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M40; M41; H57.

Money Politics Ahead Of The 2024 Of General Election

The practice of money politics is a phenomenon that often occurs in general elections in Indonesia, including in the face of the 2024 election. Before voting is carried out by voters, during the campaign period, there is a provision of basic necessities to constituents to gain their support. This article tries to formulate the reasons behind the still rampant practice of money politics in holding simultaneous elections in 2024. The method of literature research is used by referring to various related articles. The findings of this article show that the practice of money politics in Indonesian elections has become part of a culture that is difficult to eliminate and has become so ingrained, that it will damage the level of public or constituent trust in the candidate and party concerned. High political costs also open the door wide for corrupt practices that tend to justify all means through the party's transactional approach.

The role of regional tax autonomy, firm size, and business groups in tax avoidance: evidence from Spain

ABSTRACT This paper investigates the influence of regional tax autonomy, firm size, and business group affiliation on corporate tax burden in a large sample of Spanish firms, including non-listed firms, from 2007 to 2016. Our findings reveal that firms located in tax-autonomous regions exhibit lower effective corporate tax rates (ETR), providing new empirical support for the horizontal tax competition theory. Additionally, we identify a positive relationship between firm size and corporate tax burden, aligning with the political cost theory. Furthermore, we find that group-affiliated firms face a higher ETR than independent firms, and that group affiliation attenuates the differences in the tax burden experienced by large and small firms.

Regionale Disparitäten in der Transformation: Braucht es ein Update der deutschen Regionalpolitik?

Abstract The green transition will affect different places in diverse ways, as place specific and contextual factors, such as pre-existing industrial specialisations, shape how transitions unfold in various territories. In the absence of a place-sensitive approach to decarbonisation, regional disparities are likely to intensify. This may make those who will be potentially hard hit reluctant to support policies necessary for reducing GHG-emissions. Research shows that populist parties that have been the most vocal opponents of climate policies in many countries can capitalize on this sentiment. Thus, investigating how both economic and political costs of the transition will be distributed regionally is key to crafting policies that make a just transition possible. By drawing on the findings of Südekum and Rademacher (2024), the text at hand discusses how the costs of the green transition are likely to be distributed among regions in Germany and what to do about it. It calls for a proactive approach to regional policy and outlines how Germany’s most important regional policy programme can be updated.

Political connections and greenwashing: Chinese evidence

ABSTRACT Many firms are engaging in greenwashing, misleading claims about their Environmental, social, and governance (ESG) performances, which make the inclusion of ESG factors in investment decisions becomes challenging. However, little research has been conducted on its drivers. Given the prevalence of political connections and the impacts on firms’ behaviour, this paper investigates the unknown relationship between political connections and greenwashing in Chinese A-listed companies from 2011 to 2020. The study finds that firms with political connections exhibit a greater degree of greenwashing than those without, indicating that political connections significantly improve greenwashing. Moreover, analysis suggests that the lower external pressure from government regulations and media contributes to the greater degree of greenwashing in politically connected firms. Finally, the positive effects of political connections on greenwashing vary significantly depending on politician characteristics, political connection costs, marketization degree, and industry features. This study contributes to a better understanding of the business ethics and the impacts of political connections on greenwashing and the mechanisms for firms in transitional economies like China. The findings highlight the importance of strengthening market-supporting institutions to reduce greenwashing. Policymakers should take measures to reduce the prevalence of political connections and promote a more transparent and equitable business environment.

The prison boom, local interpersonal violence, and domestic violence homicide

ABSTRACT The US prison system has exploded since 1970, dramatically reshaping social, political, and economic life in rural communities. Since 2000, roughly one in five rural Americans resides in a prison town. The prison boom is the largest public works project perhaps since the New Deal. Despite a growing interest in prison building, there is a dearth of research examining prison impact – the economic, political, and social costs and benefits for communities that result from building a prison. In this paper, we fill this gap by studying the relationship between prison impact – measured as binary prison presence and cumulative prison count – on violent crime, specifically, intimate partner and domestic violence homicide (IPV/DV). We explore the theoretical foundations for this relationship, including the economic, geographic, and social effects of prisons and correction officers as a high-risk group for perpetrating IPV/DV. Contrary to conventional wisdom, we find evidence of a negative association between prison impact and IPV/DV homicide, with an additional prison in the county corresponding with 0.04–0.12 fewer homicide events. While we are not advocating for prison building as a violence nor crime reduction strategy for communities, our findings complicate the policy consequences of the prison boom, especially in rural communities.

Life Time Cost of Public Servants

PREAMBLE The government of Pakistan is facing a growing financial challenge due to the high number of non-productive government employees. Politicians pride themselves on placing their favourites in the public sector knowing that the taxpayer has no say in the process and will pay the cost. Yet no one looks at what the cost of this dirigiste politics is! Not only are most political employees mostly employed in positions where they are not productive, they are also a drain on the budget. An employee when hired represents a stream of commitments from the budget for her lifetime and beyond given guarantees a of lifetime employment and pension and for pension to surviving widows and unmarried daughters. We show here what the expected compensation amounts to. We calculate the present value of the government commitment here. This is the value that the government must place in a bond to make the hiring budget neutral for the coming generation. Otherwise, the cost will inflate in future budgets. The estimates presented here are of immense value in understanding our fiscal predicament. We do hope that politicians and media will use them in a debate on our fiscal situation. Like all estimates they are based on available data and some assumptions.

World Psychiatric Association-Asian Journal of Psychiatry Commission on Public Mental Health

Although there is considerable evidence showing that the prevention of mental illnesses and adverse outcomes and mental health promotion can help people lead better and more functional lives, public mental health remains overlooked in the broader contexts of psychiatry and public health. Likewise, in undergraduate and postgraduate medical curricula, prevention and mental health promotion have often been ignored. However, there has been a recent increase in interest in public mental health, including an emphasis on the prevention of psychiatric disorders and improving individual and community wellbeing to support life trajectories, from childhood through to adulthood and into older age. These lifespan approaches have significant potential to reduce the onset of mental illnesses and the related burdens for the individual and communities, as well as mitigating social, economic, and political costs. Informed by principles of social justice and respect for human rights, this may be especially important for addressing salient problems in communities with distinct vulnerabilities, where prominent disadvantages and barriers for care delivery exist. Therefore, this Commission aims to address these topics, providing a narrative overview of relevant literature and suggesting ways forward. Additionally, proposals for improving mental health and preventing mental illnesses and adverse outcomes are presented, particularly amongst at-risk populations.

Should rTMS be considered a first-line treatment for major depressive episodes in adults?

Treatment-resistant depression (TRD) is an epidemic with rising social, economic, and political costs. In a patient whose major depressive episode (MDE) persists through an adequate antidepressant trial, insurance companies often cover alternative treatments which may include repetitive transcranial magnetic stimulation (rTMS). RTMS is an FDA-cleared neuromodulation technique for TRD which is safe, efficacious, noninvasive, and well-tolerated. Recent developments in the optimization of rTMS algorithms and targeting have increased the efficacy of rTMS in treating depression, improved the clinical convenience of these treatments, and decreased the cost of a course of rTMS. In this opinion paper, we make a case for why conventional FDA-cleared rTMS should be considered as a first-line treatment for all adult MDEs. RTMS is compared to other first-line treatments including psychotherapy and SSRIs. These observations suggest that rTMS has similar efficacy, fewer side-effects, lower risk of serious adverse events, comparable compliance, the potential for more rapid relief, and cost-effectiveness. This suggestion, however, would be strengthened by further research with an emphasis on treatment-naive subjects in their first depressive episode, and trials directly contrasting rTMS with SSRIs or psychotherapy.