Political Economy Of Reform Research Articles

Public Debt and the Political Economy of Reforms

How do electoral incentives influence the choice to experiment with a policy reform that generates uncertain future benefits? To answer this question, we examine a two-period model of redistributive politics with uncertain policy outcomes involving a mixture of private and public benefits. In equilibrium, we find that the intertemporal trade-off between current policy costs and future benefits creates an incentive for politicians to use public debt to smooth spending across periods. The higher the share of policy benefits that are in the form of a public good, the higher the level of available debt-related spending on targeted policies that is necessary. (JEL D63, D72, E23, H41, H63)

Kai Kajitani and Tomoki Kamo, Political Economy of Reform in China

Kai Kajitani and Tomoki Kamo, Political Economy of Reform in China

DUALIST POPULAR CONSTITUTIONALISM A Reply to Michelman

DUALIST POPULAR CONSTITUTIONALISM A Reply to Michelman

The political economy of reforms in Central Bank design: evidence from a new dataset

AbstractWhat explains the worldwide changes in central bank design over the past five decades? Using a new dataset on central bank institutional design, this paper investigates the timing, pace and magnitude of reforms in a sample of 154 countries over the period 1972–2017. I construct a new dynamic index of central bank independence (CBI) and show that past levels of independence, as well as regional convergence, represent important drivers of changes in central bank design. An external pressure, such as obtaining an IMF loan, or political events, such as democratic reforms and the election of nationalistic governments, also impact the reform process. Reforms also follow periods of high inflation rates suggesting an endogenous evolution of CBI. The results also reveal important heterogeneities in the reform process depending on the level of development, the size and direction of reforms, as well as the different dimensions along which central bank legislation can be amended.

Integrating Pixels, People, and Political Economy to Understand the Role of Armed Conflict and Geopolitics in Driving Deforestation: The Case of Myanmar

Armed conflict and geopolitics are a driving force of Land Use and Land Cover Change (LULCC), but with considerable variation in deforestation trends between broader and finer scales of analysis. Remotely-sensed annual deforestation rates from 1989 to 2018 are presented at the national and (sub-) regional scales for Kachin State in the north of Myanmar and in Kayin State and Tanintharyi Region in the southeast. We pair our multiscaled remote sensing analysis with our multisited political ecology approach where we conducted field-based interviews in study sites between 2018 and 2020. Our integrated analysis identified three common periods of deforestation spikes at the national and state/region level, but with some notable disparities between regions as well as across and within townships and village tracts. We found the rate and geography of deforestation were most influenced by the territorial jurisdictions of armed authorities, national political economic reforms and timber regulations, and proximity to national borders and their respective geopolitical relations. The absence or presence of ceasefires in the north and southeast did not solely explain deforestation patterns. Rather than consider ceasefire or war as a singular explanatory variable effecting forest cover change, we demonstrate the need to analyze armed conflict as a dynamic multisited and diffuse phenomenon, which is simultaneously integrated into broader political economy and geopolitical forces.

Understanding the influence of vested interests on politics of anti-corruption in Indonesia

ABSTRACT The aim of conceptual article is to consider the available literature regarding associations between the role of vested interests and its impacts on anti-corruption measures in Indonesia. Research focusing on vested interests as a side-effect of political-economic reforms in the Indonesian context is limited, although there are extensive studies regarding the impact of neo-liberal reforms consisted of democratization, market liberalization and institutional reforms on the effectiveness of anti-corruption approaches in developing countries. Indonesia is one of the developing countries applying neo-liberal reforms expected to curb corruption more effectively. Because vested interests are very persistent and likely to be more influential to the anti-graft approaches during the transitional periods in Indonesia, there is a need to understand the ways in which the vested interests work. The key outcome of this article is to highlight the need to better understand how the persistent corrupt forces have created an unpredictable and uncertain future of Indonesia’s anti-graft agenda. Recommendations for future research regarding associations between the role of vested interests and effective or ineffectiveness of anti-corruption machines are provided to stimulate more empirical attention to this area to support Indonesia to create more transparent and accountable politico-business environment.

Public Debt and the Political Economy of Reforms

We consider a model of redistributive politics in which politicians have the possibility to raise some debt and to implement a pie-increasing reform, i.e. a reform creating a net increase in the total taxable endowment. The reform benefits occur in the future and the reform costs have to be paid today, but both benefits and costs can be perfectly redistributed across voters in the period in which they occur. Voters are perfectly forward-looking and ex-ante homogeneous, and politicians are purely office-motivated. As main result, we show that a limit on debt that is sufficiently more restrictive than the natural debt limit will prevent the implementation of the reform. Such a debt limit forces the reforming candidate to pursue an overly egalitarian strategy of redistribution making it possible for a non-reforming candidate to use his better targeting capacity to win a majority of voters.

The Political Economy of Reforms in Egypt: Issues and Policymaking since 1952 by Khalid Ikram, Cairo, American University in Cairo Press, 2018, xx + 428 pp.

The Political Economy of Reforms in Egypt: Issues and Policymaking since 1952 by Khalid Ikram, Cairo, American University in Cairo Press, 2018, xx + 428 pp.

Fractionalization and reform: a framework of political collaboration with application to Lebanon

How does fractionalization affect political collaboration on reform? We develop a theory to explain observable variation in legislative output over time and policy areas. We show how the properties of a reform project determine the extent to which fractionalization affects political collaboration on reform. We apply our framework to the case of Lebanon and present mixed-methods evidence based on a novel comprehensive dataset of legislative activity and 32 interviews with parliamentarians, ex-ministers, and other high ranking officials. Our findings contribute to explaining ambiguous evidence in the literature on the political economy of reform.

The political economy of pension reforms in Europe under financial stress

AbstractDespite a substantially unchanged problem load in the last 20 years, EU Member States witnessed a recent surge in pension reforms. Since the Great Recession, external market and political pressures started outcompeting national politics in pension-related decisions. Employing European Commission data on major pension reforms during 2006–2015, we find that governments respond to higher risk premia charged by international financial actors. Macro-policy fundamentals, such as budget deficits, and micro-policy indicators, such as pension spending, instead, only signal the necessity to act. They trigger the reforms in the presence of EU conditionality, that is, in the presence of Excessive Deficit Procedures and Country-Specific Recommendations within the European Semester. These findings deepen our understanding of the Europeanization of social policy, contribute to the literature on the political economy of reforms and testify to the declining role of domestic factors in the politics of the welfare state.

Recent Advances in Probability-Based and Nonprobability Survey Research

At the turn of the decade, this special issue is a symbol of transformation in the survey world that slowly started in the 2000s and that is likely to continue into the future. At the heart of this transformation lies an age-old academic debate on the merits and costs of probability sampling methods for survey research. While a century ago, probability sampling was hailed as a way of saving costs when depicting social phenomena that were previously described by censuses only, it is becoming increasing expensive. At the same time, society is experiencing a great hunger for ever more and “bigger” data that may explain the increasingly complex world around us. A workshop on “Probability-Based and Nonprobability Survey Research” funded by the German Research Foundation (DFG) and organized by the Collaborative Research Center “Political Economy of Reforms” (SFB 884) at the University of Mannheim in June 2018 brought together expertise on the challenges and pitfalls of probability and nonprobability sampling and planted the seed for this special issue.

The Political Costs of Reforms

Many countries are experiencing persistent, weak medium-term growth and limited fiscal space. Against this background, economic policy agendas—in both advanced and developing economies—are focusing increasingly on structural reforms. While there is broad agreement on the economic benefits of structural reforms, the political-economy of reform is less settled. This is because reforms may generate gains only in the longer term while distributional effects may be sizable in the short run, and because governments may lack political capital to confront vocal interest groups. In these circumstances, politicians may hold back on reforms, fearing they will be penalized at the ballot box. The aim of this Staff Discussion Note is to examine whether the fear of a political cost associated with structural reforms is justified by the available evidence, and whether there are lessons from the data about how reform strategies might be designed to mitigate potential political costs. It provides a major addition to recent IMF analysis examining the output and employment effect of reforms

International organizations and the political economy of reforms

We develop a simple dynamic model of policy reform that captures some of the determinants that underlie the differences between the reform paths taken by a number of countries since the early 1990s. The model focuses on the interaction between domestic institutions and international organizations that promote reform, on the one hand, and the political incentives for reversing reforms, on the other. At equilibrium, there are three types of reform paths. A country can undergo a full-scale, lasting reform, can carry out a partial but lasting reform, or can go through cycles of reforms and costly counter-reforms. Domestic institutions, along with the incentives provided by international organizations, determine the equilibrium path. A politically myopic international organization may induce cycles of reforms and costly counter-reforms, thereby reducing the country's well-being. An international organization that only provides funds to promote reforms may have a less beneficial effect than one that assists the country with fresh funds to defend reforms when there is a risk of reversal. International funds that promote reforms can also influence domestic institutions. For example, due to the intervention of an international organization, countries could have incentives to dismantle institutions that build up reversal cost and/or do not fully build their fiscal capacity.

Political Economy of Reform under US Federalism: Adopting Single-Payer Health Coverage in New York State

The US remains the only high-income country that lacks a universal health financing system and instead relies on a fragmented system with the largest segment of the population receiving health insurance through private, voluntary employer-sponsored health insurance plans. While not “universal” in the sense of being mandatory and tax-financed, through a series of reforms, the US has managed to provide some form of health insurance coverage to 90% of the population. Yet, the high cost of this system, the insufficient coverage afforded to many, and continued concerns about equity have led to calls for a national health insurance program that can reduce costs across the board while providing high-quality coverage for all. Given the policy gridlock at the national level, the states have often sought to achieve universal health financing on their own, but these bills have met with little success so far. Why has the ideal of states as “laboratories of democracy” failed to produce policy change towards national health insurance? This article examines the prospects for the New York Health Act, a single-payer bill that would create a universal health financing plan for all New York State residents. Applying the Political Economy of Health Financing Framework, we analyze the politics of health reform in New York State and identify strategies to overcome opposition to this policy proposal. We find that while a clear political opportunity is in place, the prospects for adoption remain low given the power of symbolic politics and institutional inertia on the reform process.

The political economy of reforms in Egypt: issues and policymaking since 1952

The political economy of reforms in Egypt: issues and policymaking since 1952

Government ownership of banks, political system transparency, and regulatory barriers to new firm entry

Why do governments pursue regulatory reforms fostering entrepreneurship? In this paper, we examine the link between government ownership of banks, political regime transparency, and regulatory barriers to the entry of new industrial firms. We propose a signalling theory for the deregulation of entry. We argue that high levels of government ownership of banks and political system opacity erode the reputation of national economies in the eyes of international investors. To improve international perceptions of their business and investment climate, governments reduce regulatory barriers to new business entry. Deregulation of new firm entry signals an improved investment climate to foreign investors, and thereby substitutes for political system transparency. This signal is credible, valued by international investors, and easier to implement than alternative signals. Evidence drawn from an analysis of 93 developed and developing countries supports our propositions. Countries with high levels of state ownership of banks exhibit higher regulatory barriers to firm entry. However, this relationship attenuates and even reverses in extremely opaque political systems. Consistent with our argument that international perceptions are the key mechanisms underlying this conditional relationship, we also show that the moderating effect of political system opacity weakens among countries with high levels of government ownership of banks and FDI inflows. Our findings have important implications for the literature on state ownership of banks, the political economy of reform, and for our understanding of strategic signalling in international relations.

Unsettling Territory: Indigenous Mobilizations, the Territorial Turn, and the Limits of Land Rights in the Paraguay-Brazil Borderlands

The territorial turn in Latin America has resulted in the restitution of more than 200 million hectares of land to Indigenous and Afro-descendant communities since the 1990s. While the territorial turn has provided a juridical solution to numerous Indigenous land claims by legally demarcating collective property rights, title does not necessarily resolve territorial disputes. Such is the case with the Kue Tuvy Aché community in the Paraguay-Brazil borderlands that successfully won collective title only to be continually confronted with (extra-)legal challenges to their hard-won land rights. Drawing from qualitative research with Kue Tuvy community members, secondary-source data, and scholarship on territorial epistemologies from Latin American and Anglophone scholars, I analyze the grounded effects of territorial turn politics with attention to struggles that precede the turn and the conflicts that follow issuance of title. The paper shows how the territorial turn plays out in place, not merely as the product of neoliberal political economic reforms but as Indigenous efforts to unsettle territory to create communal spaces for more just futures. I argue that territorial assemblages are never finished, just as struggles for Indigenous justice do not end with territorial restitution.

Unsettling territory: Indigenous mobilizations, the territorial turn, and the limits of land rights in the Paraguay-Brazil borderlands

The territorial turn in Latin America has resulted in the restitution of more than 200 million hectares of land to Indigenous and Afro-descendant communities since the 1990s. While the territorial turn has provided a juridical solution to numerous Indigenous land claims by legally demarcating collective property rights, title does not necessarily resolve territorial disputes. Such is the case with the Kue Tuvy Aché community in the Paraguay-Brazil borderlands that successfully won collective title only to be continually confronted with (extra-)legal challenges to their hard-won land rights. Drawing from qualitative research with Kue Tuvy community members, secondary- source data, and scholarship on territorial epistemologies from Latin American and Anglophone scholars, I analyze the grounded effects of territorial turn politics with attention to struggles that precede the turn and the conflicts that follow issuance of title. The paper shows how the territorial turn plays out in place, not merely as the product of neoliberal political economic reforms but as Indigenous efforts to unsettle territory to create communal spaces for more just futures. I argue that territorial assemblages are never finished, just as struggles for Indigenous justice do not end with territorial restitution.

Does democracy promote capital account liberalization?

Conventional wisdom maintains that democracy promotes market-oriented economic reforms. This paper argues that democracy’s effect on economic liberalization hinges on international-systemic factors. To develop this argument, we focus on one important reform issue: capital account liberalization. We hypothesize that the level of financial openness abroad moderates the relationship between democracy and financial policy at home. An open global financial system increases societal support for capital account liberalization and incentivizes democratic leaders to liberalize the capital account. Analyses of country-level panel data demonstrate that democracy is only positively associated with capital account openness when proximate countries maintain open capital markets. Firm-level survey data and an illustrative case study of Argentina provide support for the mechanisms by showing that policy choices abroad influence domestic support for capital account liberalization. Our findings suggest that integrating domestic- and international-level variables in a single framework improves our understanding of the political economy of reform.

The Political Economy of Reforms in Central Bank Design: Evidence from a New Dataset

What explains the worldwide changes in central bank design over the past five decades? Using a new dataset on central bank institutional design, this paper investigates the timing, pace and magnitude of reforms in a sample of 155 countries over the period 1972-2017. I construct a new dynamic index of central bank independence and show that status quo, as well as regional convergence, represent important drivers of changes in central bank design. An external pressure, such as obtaining an IMF loan, also impacts the reform process, while political or economic factors have a heterogeneous impact depending on the level of economic development. Reforms also follow periods of high inflation rates, suggesting an endogeneous evolution of central bank independence. The results also reveal important heterogeneities in the reform process depending on the level of development, the size and direction of reforms, as well as the different dimensions along which central bank legislation can be amended.