Political Economy Explanation Research Articles

Potash ownership and extraction: Between a rock and a hard place in Saskatchewan

It is difficult for almost all governments to combine efficient non-renewable natural resource production with effective capture of the resource rents. Governments must navigate between a “rock” of public sector extraction using relatively inefficient state-owned enterprises with considerable attendant rent dissipation and a “hard place” of private sector extraction with potential rent transfer or dissipation. We use the privatization of Potash Corporation of Saskatchewan (PCS) to illustrate this trade-off. We employ a “pre-post privatization” performance comparison to show that privatization did result in considerably improved PCS productive efficiency. We show, however, that Saskatchewan governments have been less successful at capturing significant resource rents following privatization. We consider some political economy explanations, including industry influence and an opaque rent tax regime that minimizes any negative electoral consequences of low rent appropriation. We discuss ways of increasing public rent capture: a more efficient and transparent rent tax regime, some share acquisition in potash firms (or specific projects) in order to provide a more accurate cost window on the industry, or some combination of a better tax regime and ownership.

Why Are Banks Not Recapitalized During Crises? A Political Economy Explanation

I develop a model where the sovereign debt capacity depends on the capitalization of domestic banks. Low-capital banks optimally tilt their government bond portfolio toward domestic securities, linking their destiny to that of the sovereign. If the sovereign risk is sufficiently high, low-capital banks reduce private lending to further increase their holdings of domestic government bonds, lowering sovereign yields and supporting the home sovereign debt capacity. The model rationalizes, in the context of the eurozone periphery, the increase in domestic government bond holdings, the reduction of bank credit supply, and the prolonged fragility of the financial sector.

The political economy of recession in Nigerias fourth republic

In recent times, an exceptionally large and virulent recession engulfed the Nigerian State that had for the previous two and half decades experienced sustained growth at unprecedented levels. The causes as well as sense of threat and uncertainty induced by the crisis have been differently interpreted, particularly from the macro-economic, leadership and strategic standpoints. This paper offers a political economy explanation of recession in Nigeria's Fourth Republic. The study adopts the descriptive/qualitative research technique to probe the following questions: What are the factors responsible for the crisis? What is the relationship between the structure of the Nigerian State and recession? How may recession be checked? The paper argues that recession expresses the capitalist nature of the Nigeria State. Moreover, lack of political will of the successive governments to save, corruption, mismanagement and overdependence on oil earnings, among other, are the factors that instigated the recession. The study recommends substantial structural reforms that will overthrow the system that serves the narrow interests of the capitalists class rather than people. There is also the need to diversify the nation's economy, particularly investing on the non-oil sector such as manufacturing and agriculture production. Key words: Nigeria, recession, gross domestic product, corruption, fourth republic, crude oil earnings.

Competitive Clientelism and the Political Economy of Mining in Ghana

This paper offers a political economy explanation to the question of why over 100 years of mineral resource extraction in Ghana has failed to translate into broadbased development. It does so through the lens of political settlements, which draws attention to how relations of power and ideas shape elite commitment to allocating mineral resources towards long-term development goals. The analysis draws attention to how clientelist political pressures engendered by Ghana’s highly competitive electoral system have historically underpinned the diversion of mineral revenues towards shorter-term goals of maintaining the stability of ruling coalitions. In particular, all ruling coalitions have allocated significant shares of mineral rents to chiefs not necessarily for the socio-economic development of their communities, but mainly because political elites want to avoid provoking resistance from a group in society that brokers land and votes in rural areas. These findings challenge recent suggestions concerning the centrality of inclusive political settlements for the effective management of mineral rents. As the analyses reveal, broad-based elite inclusion can also carry the danger of undermining the effective management of rents for long-term development if mineral rents are deployed with the aim of ‘buying-off’ elites who can potentially undermine the stability of ruling coalitions. Under such circumstances, inclusive political settlements may at best result in unproductive peace, as substantial mineral resources are shared for consumption rather than development.

Why is meat so important in Western history and culture? A genealogical critique of biophysical and political-economic explanations

How did meat emerge to become such an important feature in Western society? In both popular and academic literatures, biophysical and political-economic factors are often cited as the reason for meat’s preeminent status. In this paper, we perform a comprehensive investigation of these claims by reviewing the available evidence on the political-economic and biophysical features of meat over the long arc of Western history. We specifically focus on nine critical epochs: the Paleolithic (200,000 YA—10,000 YA), early to late Neolithic (10,000 YA—2500 BCE), antiquity (2500 BCE—550 CE), ancient Israel and early Christian societies (1550 BCE—379 CE), medieval Europe (476 CE—1400 CE), early modern Europe (1400–1800), colonial America (1607–1776), the American frontier (1776–1890), and the modern industrial era (1890—present). We find that except under conditions of environmental scarcity, the meaning and value of meat cannot be attributed to intrinsic biophysical value or to the political-economic actors who materially benefit from it. Rather, meat’s status reflects the myriad cultural contexts in which it is socially constructed in people’s everyday lives, particularly with respect to religious, gender, communal, racial, national, and class identity. By deconstructing the normalized/naturalized materialist assumptions circling around meat consumption, this paper clears a space for a more nuanced appreciation of the role that culture has played in the legitimation of meat, and by extension, the possibility of change.

Do People with Social Jobs Fear Immigrants Less? Evidence from the European Social Survey

Immigrants face higher barriers to entry into occupations that rely on social skills. As a result, they are less likely to pose a labor market threat to workers who hold social skill-intensive jobs in the recipient country. Using data from the 7th round of the European Social Survey and the O*NET occupational database, I find that individuals in social occupations exhibit more favorable attitudes towards immigration, and favor less restrictive immigration policies. The opposite pattern holds for individuals whose occupations rely on technical, rather than social, skills. These findings are consistent with political economy explanations of immigration attitudes that focus on the role of competition in the labor market.

Judicial Independence in the EU A Puzzle

Based on data from the EU Justice Scoreboard, we identify a puzzle: National levels of judicial independence (as perceived by the citizens of EU member states) are negatively associated with the presence of formal legislation usually considered as conducive to judicial independence. We try to resolve this puzzle based on political economy explanations and specificities of legal systems, but to no avail. We then ask whether cultural traits can help to put together the puzzle. And indeed, countries with high levels of generalized trust (and to a lesser extent individualistic countries) exhibit increased levels of de facto judicial independence and, at the same time, reduced levels of de jure judicial independence. The combination of these two effects can explain why judicial reforms that should be conducive to an independent judiciary may seem to have adverse consequences. We conclude that cultural traits are of fundamental importance for the quality of formal institutions, even in societies as highly developed as the EU member states.

Buffers Against Inconvenient Knowledge: Brazilian Newspaper Representations of the Climate-Meat Link

Analisando a cobertura sobre o clima nos jornais brasileiros nos anos 2002 até 2010, este artigo mostra que a mudança climática foi enquadrada como um problema de energia apesar de ela ser uma pequena parte das emissões do país em comparação com as emissões de mudança no uso da terra e da agricultura. Enquanto a produção de carne é a maior causa das emissões nacionais, discussões sobre a carne como um problema no contexto das alterações climáticas foram marginais, na melhor das hipóteses. À medida em que apareceu, o tema da carne era subdesenvolvido e abordado de tal forma que reduziu a atenção, a preocupação e o poder dos brasileiros para guiar o país para um novo caminho de desenvolvimento nacional mais sustentável. O artigo apresenta esses resultados e oferece uma explicação econômica e política preliminar.

Global Finance, Labor Politics, and the Political Economy of Housing Prices

International political economy identifies declining nominal interest rates, securitization, and financial liberalization as drivers of rising housing prices. Despite witnessing these common credit shocks, however, developed economies experienced divergent trends in housing inflation since the 1980s. We offer a comparative political economy explanation of variation in house prices, arguing that by restraining household incomes, wage-setting institutions can blunt financial liberalization’s inflationary impact on housing markets. Employing quantitative analysis and a comparative study of Ireland and the Netherlands, we uncover two findings. First, countries where political coalitions in the export sector held veto powers over those in the nontraded sector in national wage setting realized lower housing inflation. Second, the impact of sectoral coalitions on housing prices in OECD countries is similar to that of financial variables. Our results suggest that the organization of labor politics continues to play an important role in mitigating the destabilizing effects of global finance on developed economies.

Domestic Institutions and the Ratification of International Agreements in a Panel of Democracies

A recent literature explores how domestic institutions affect politicians’ incentives to enter into international agreements (IAs). We contribute to this field by systematically testing the impact of a broad set of domestic institutional design features. This approach allows us to compare new and established political economy explanations of IA entry. For this purpose, 103 democracies are analyzed over the period 1975 to 2010. We find that domestic institutions determine countries’ disposition to enter into IAs, as predicted by political economic theory. For example, democracies with majoritarian electoral institutions have lower IA ratification rates than other democracies. Countries also ratify more IAs when their democratic institutions are long-lived and they lack an independent judiciary. However, programmatic parties and the number of domestic veto players are not associated with IA ratification. The key take-away of this study is that domestic institutions matter for how frequently states conclude formal deals with each other.

Domestic institutions and the ratification of international agreements in a panel of democracies

A recent literature explores how domestic institutions affect politicians’ incentives to enter into international agreements (IAs). We contribute to this field by systematically testing the impact of a broad set of domestic institutional design features. This allows us to compare new and established political economy explanations of IA entry. For this purpose, 99 democracies are analyzed over the period 1975–2010. We find that domestic institutions determine countries’ disposition to enter into IAs, as predicted by political economic theory. For example, democracies with majoritarian electoral institutions are less likely to conclude IAs than other democracies. Countries also conclude more IAs when their democratic institutions are long-lived and they lack an independent judiciary. However, programmatic parties and the number of domestic veto players are not associated with IA-making. The key take-away of this study is that specific domestic institutions matter for how frequently states make formal deals with each other.

Demand Shortfalls or Supply-side Constraints

This article presents a political economy explanation for the dramatic decline in performance of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), India’s largest social welfare policy, in one of its highest performing states, Rajasthan. The sharp decline from 2009 to 2010 is shown to be counter-intuitive, given the active civil society engagement right from the early stages of the Act’s making and implementation. Using information from field visits, interviews and secondary literature, I unpack the reasons for this decline, evaluating the validity of demand-side shortfalls and supply-side constraints as explanations. I demonstrate that it is primarily low capacity and low motivation of state officials that have led to the drop in MGNREGA’s performance. Further, I argue that the biggest strengths of the MGNREGA, that is, demand-based nature and provisions around transparency, have been made its most pressing shortcomings. Given the political nature of implementation of the MGNREGA, I conclude that Rajasthan needs political engagement strategies rather than merely technocratic solutions if this downturn is to be arrested.

Origins of reform resistance and the Southern European regime

With a particular interest for Southern Europe, this contribution develops a classification of obstacles to economic policy reforms. This classification covers approaches ranging from classical economics and political-economic explanations to more innovative explanations linked to behavioral economics. The subsequent part analyzes qualitatively and quantitatively to which extent the “Southern European regime” may imply a particular relevance of some of the potential reform obstacles classified before. We derive “reform ability profiles” which quantify several of the reform obstacles (or reform drivers) to compare EU countries in their likely reform predisposition. These profiles confirm particular Southern European weaknesses which tend to reduce the political-economic feasibility of long-term reforms: a low effectiveness in poverty protection, high intertemporal discounting and uncertainty avoidance, a poor information level of the population and deeply shattered trust in national institutions. In a microeconometric analysis based on Eurobarometer survey data, the analysis leaves the highly aggregated level and looks into the individual heterogeneity in reform acceptance. It is shown that several of the reform obstacles identified in theory are also empirically correlated with the individual inclination to accept reforms.

The Puzzle of Agricultural Exceptionalism in International Trade Policy

This article first seeks to demonstrate the exceptional levels of protectionism accorded to the agricultural sector, especially in many developed countries. It reviews the principal protectionist measures employed: domestic subsidies and price supports, production restrictions, and border measures; describes briefly the disciplines applicable to these measures under World Trade Organization law; and then surveys empirical evidence on the extent of protectionism that prevails in the agricultural sector in many countries. Next, it evaluates the principal normative justifications often offered for exceptional levels of agricultural protectionism: ensuring access to affordable food; ensuring a livable income for farmers; and preserving traditional rural lifestyles and communities. It finds that these are not especially compelling either relative to many other economic sectors or in terms of first-best policy responses to the normative concerns in question. The article then considers political economy explanations for exceptional levels of protectionism in agriculture—including Public Choice explanations and the transitional gains trap—which, while providing some purchase on the phenomenon, are again not completely compelling. The article concludes with some observations on how liberalization of trade in agricultural products might be advanced in the future.

No blessing, no curse? On the benefits of being a resource-rich southern region of Italy

The aim of this research is to examine the aggregate economic effects of large-scale oil extraction in Basilicata, a southern region of Italy. This paper is the first empirical attempt to test for a regional resource curse by constructing a comparison unit using synthetic control techniques. The comparison unit captures how Basilicata׳s economic activities would have evolved in the absence of the oil extraction industry. The negligible differences between economic parameters in Basilicata and in its comparison unit suggest that a large amount of oil extraction has had no detectable effect on Basilicata׳s economy. A set of tentative political economy explanations of the result of missing effects is also provided, based on control rights structure, the royalty tax rate and organized crime.

The Politics of Commoditization in Global ICT Industries: A Political Economy Explanation of the Rise of Apple, Google, and Industry Disruptors

The global Information and Communications Technologies industry has experienced a rapid, radical reorganization of industry leaders and business models—most recently in mobile. New players Apple and Google abruptly redefined the industry, bringing a wave of commoditization to carriers and equipment manufacturers. Technologies, corporate strategies, and industry structures are usually the first places to look when explaining these industry disruptions, but this paper argues that it was actually a set of political bargains during initial phases of telecommunications liberalization, which differed across countries, that set the trajectories of development in motion. This paper shows how different sets of winners and losers of domestic and regional commoditization battles emerged in various ICT industries around the world. Carriers won in Japan, equipment manufacturers in Europe, and eventually, computer services industry actors rather than communications firms emerged as winners in the US. These differences in industry winner outcomes was shaped by the relative political strength of incumbent communications monopolies and their will to remain industry leaders, given the political system and political dynamics they faced during initial liberalization. The US computer services industry, which developed independently of its telecommunications sector due to antitrust and government policy, eventually commoditized all others, both domestically and abroad. This paper contends that a political economy approach, tracing how politics and regulatory processes shaped industry structures, allows for a better understanding of the underlying path dependent processes that shape rapidly changing global technological and industry outcomes, with implications beyond ICT.

Trade Policy Uncertainty and the WTO

Do WTO commitments reduce the risk of trade policy reversals? To address this question, we rely on the theoretical model of varying cooperative tariff s by Bagwell and Staiger (1990) to specify our empirical model for the probability of a tariff inc rease. We then study how WTO tariff commitments affect this probability. We estimate our model usin g a database of WTO bound tariffs that we built for all WTO Members from 1996 to 2011 at the HS 6-digit level of disaggregation. Our results show that WTO commitments significantly reduce the probability of a tariff increase, even when the bound tariff is above the MFN applied rate. In addition, the WTO reduces trade policy uncertainty through its monitoring function. These results are robust t o including political economy explanations of tarif f changes and to addressing endogeneity concerns.

They Don't Want to Workk versus They Don't Want to Provide Workk: Seeking Explanations for the Decline of MGNREGA in Rajasthan

This paper presents a political economy explanation for the dramatic decline of MGNREGA in Rajasthan. Originally one of the highest performing states, Rajasthan has seen a sharp decline from around 2010 onwards in the uptake of MGNREGA. The paper makes a case for this decline being counter-intuitive, given that actors working at the grassroots level were central in the formulation processes of the Act, contributing critically to the design of the Act. This paper uses information from recent field visits and secondary literature to unpack the reasons for this decline, discussing both demand-side factors and supply-side factors as explanations. It demonstrates that in Rajasthan, it is primarily the supply-side factors that have led to a decline in MGNREGA’s performance. The paper demonstrates that in Rajasthan, the greatest strengths of MGNREGA, i.e. demand-based nature and provisions around transparency, have been made its greatest shortcomings. Given the political nature of implementation of the MGNREGA, it is concluded that Rajasthan needs to put in place political engagement strategies, rather than merely technocratic solutions, if this downturn is to be arrested.

Attracting High‐Skilled Immigrants: Policies in Comparative Perspective

AbstractLabour market shortages, structural problems and unfavourable demographics have all prompted governments to act, often by focusing on high‐skilled immigration. However, policy responses have been very different. Some countries were able to adopt quite open high‐skilled immigration policies, while others did not. This article provides a political economy explanation for this. It argues that, despite similar pressures, high‐skilled immigration policy outputs vary due to shifting coalitions between disaggregated sectors of native high‐skilled, low‐skilled labour and capital. To probe this argument, the article examines coalitions in four countries (France, Germany, Sweden and the United Kingdom) from the late 1990s to present, and draws on original interviews with policy‐makers, unions and employers' associations; official documents and the literature on immigration, political economy and public policy. The varying labour market organization of actors informs differences in coalitions which in turn has resulted in different high‐skilled immigration policy outputs, cross‐nationally and over time.

The Late Embrace of Urban Water Service Privatization in India: A Political Economy Explanation

Political and economic reforms in India have made private sector participation (PSP) in urban water delivery a viable strategy for state and city policy, against the expectations of many scholars. This paper provides a comprehensive analysis of the development of temporal, geographic and stakeholder variation in urban water PSP within India. Basic regression models are used to explore state-level determinants of PSP as well as variation in city-level contract features. Findings emphasize the role of political party ideology in implementation, the decreasing cost and length of initiatives, and the prospects for future sector private participation in India.