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Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
Constitutional Political Economy – Conceptual
Foundations, Recent Trends, Possible
Developments
by
Stefan Voigt
University of Kassel and ICER, Torino
prepared for a Lecture at the
European School
on New Institutional Economics
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
1.
Introduction
• Traditional economic analysis: choice within rules
• Constitutional Economics: choice of rules
• Constitution := any basic rule set; here: constitution of the
state
• Normative vs. positive constitutional economics
• Positive constitutional economics interested in
(1) (economic) effects of alternative constitutional rules;
(2) emergence and modification of constitutional rules.
• Over the last ten years, substantial improvement in “P1”,
some improvement in “P2”.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
Procedure:
1.
2.
3.
4.
Introduction
Conceptual Foundations
Recent Trends in Positive Constitutional Economics
Possible Future Developments
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
2.
Conceptual Foundations
2.1 The Research Program of Constitutional Economics
The Normative Branch
• Buchanan (1987): contractarian approach justificatory;
legitimating link between individual and the state.
• Pareto-criterion applied to collectivities
• Criterion not applied to outcomes but to constitutional rules
• Criterion not applied by omniscient scientist but by the
concerned individuals
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
The Positive Branch
 Economic effects of constitutional rules:
(1) Fiscal policies
• Government size
• Composition of government spending
• Budget deficit
(2) Rent extraction
• Degree of Corruption
• (In)effectiveness of Government Services
(3) Income and Growth
• Labor productivity
• Total factor productivity.
(based on Persson and Tabellini 2003, 35)
 Constitutional Rules as Explananda
Factors that bring constitutional rules
constitutional change
about
and
cause
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
2.2
Concepts of the Constitution
Constitution as
- a Social Contract
- an Incomplete Contract
- a Principal-Agent Relationship
- a Precommitment-Device
- a result of social evolution
- a Bundle of Conventions
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
2.3
Tools of Constitutional Economics
• Comparative Institutional Analysis
• Laboratory Experiments
• Econometric Analysis
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
2.4
Constitutional Political Economy and the New
Institutional Economics
• NIE with very similar questions: (1) (economic) effects of
alternative institutions and (2) determinants of institutional
change.
• NIE with very similar tools
• NIE the more inclusive program
• CPE could learn from NIE by taking into account that informal
institutions can be important restrictions in implementing
constitutional rules.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
3.
Positive Constitutional Economics
3.1 An overview over the various aspects analyzed:
(1)
Democracy vs. Autocracy
(2)
Individual Rights
(3)
Electoral Rules
(4)
Presidential vs. Parliamentary Regimes
(5)
Bicameralism
(6)
The Judiciary
(7)
Federalism
(8)
Direct Democracy
(9)
Procedural Rules /Amendment Rules
 Impossible to review entire literature here; instead: focus on
(4) and (6)
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
3.2
Electoral Rules
• Duverger (1954): first-past-the-post or majority rule (MR) leads
to two-party systems
• Austen-Smith
(2000):
number
of
parties
in
parliament/government higher under proportional representation
(PR) than under MR  higher budgets, higher taxes
• Lizzeri/Persico (2001): incentives to provide (i) genuine public
goods and (ii) pork-barrel projects different under MR than under
PR?  targeting, i.e. provision of pork barrel goods makes more
sense under MR  expect to see more under MR than under
PR
• Persson/Tabellini (2000, ch.9): parties under MR with incentive
to focus on swing states and promise specifically targeted goods
• Additional aspects of electoral systems: (i) district size and (ii)
ballot structure;
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
•
•
Persson/Tabellini (2003) find a number of (statistically and economically)
significant effects:
Government expenditures some 3% of GDP lower in MR than in
PR
Welfare state expenditures some 2 to 3% lower in MR than in PR
Budget deficit some 1 to 2% of GDP lower in MR than in PR
Higher proportion of individually elected candidates leads to lower
levels of perceived corruption
Countries with smaller electoral districts with more corruption
Higher proportion of individually elected candidates leads to higher
output per worker
Countries with smaller electoral districts tend to have lower output
per worker.
Yet, Persson (2005) finds that countries that switch from MR to PR tend
to have a higher likelihood of implementing structural policies that are
conducive to economic growth.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
Until now, electoral systems given; Now: endogenize:
• Boix (1999): under what circumstances did incumbent parties
change the electoral system? Start from MR; incumbents
interested in their own parliamentary representation.
If new parties perceived as weak: no change
If new parties perceived as strong: change to PR.
 For 22 systems analyzed from 1875 until 1990 broadly
confirmed
• Ticchi and Vindigni (2003): choice between majoritarian and
consensual systems determined by ex ante degree of income
inequality: if it is relatively high, majoritarian constitutions more
likely, if it is relatively low, consensual constitutions more likely.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
Under what circumstances does elite extend the franchise?
• Acemoglu and Robinson (2000): if disenfranchised credibly
threaten revolution
• Lizzeri and Persico (2004): narrow franchise can lead to
provision of pork barrel goods from which only a minority of
the elite profits; extension of the franchise can lead to the
provision of more general public goods from which the
majority of the elite profits
•  evidence is 19th century Britain as case study.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
3.3
The Judiciary
• The Judiciary as a means for government to credibly commit
to its own promises, e.g. regarding private property rights?
• But if government strong enough to create judiciary, also
strong enough to abolish, to ignore its decisions etc.
 important to distinguish between de jure and de facto
independence of the judiciary.
• Feld and Voigt (2003, 2006):
o
de jure JI with no impact on economic growth
o
de facto JI positively influences real GDP per capita
growth in sample of 73 countries.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
• What do we know about determinants of de facto JI?
(i) Hayo/Voigt (2003): de jure JI single most important explanatory
variable
(ii) And: presidential systems less likely to realize high degrees
• BUT: high degrees of de facto JI potentially dangerous: judges
with incentives to remain uninformed, became lazy, decide on
ideological basis etc.
• Questions: (i) judicial accountability competing with JI? (ii) effects
of judicial accountability on economic outcomes?
• Voigt (2005):
(i)
(ii)
no, can be complementary;
proxies used for JA highly significant for explaining variation in
income levels.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
3.4
Summing up
Exogenous
Th.
Emp.
Democracy vs. Autocracy
Individual Rights
Electoral Rules
Presidential vs. Parliamentary Regimes
Bicameralism
The Judiciary
Federalism
Direct Democracy
Procedural Rules/ Amendment Rules
Endogenous
Th.
Emp.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
4.
Possible Future Developments
The Behavioral Model
The insights of behavioral law and economics potentially relevant
How to Measure Institutions?
• Glaeser et al. (2004) with fundamental attack on NIE: empirical
work has not been measuring institutions, but policies;
• Measures often used (like the International Country Risk Guide,
World Bank Governance Indicators, Polity IV) would neither
measure policy constraints nor would they be stable; subjectivity
additional problem
• Problem well taken, yet: if (formal) institutions can only be
expected to have beneficial effects if they are factually
implemented, some kind of de facto measures needed; it is hard
to they could entirely abstain from taking outcomes into account.
Prof. Dr. Stefan Voigt
Allgemeine Wirtschaftspolitik
34109 Kassel
Nora-Platiel-Str. 4
Tel. +49-561-3089
Fax. +49-561-2818
This is it
Thank you for your attention