The efficiency of regulatory arbitrage



Abstract: Classic public choice skepticism about the regulatory state, based on theories of rent-seeking, rent extraction and regulatory capture, is based on the unrealistic, and usually unstated, assumption of a monopolist regulator. In practice, the regulatory state is polycentric, involving numerous quasi-independent agencies with overlapping responsibilities. This has led to a more optimistic picture based on the idea of regulatory arbitrage: when firms can, to some extent, pick and choose their preferred regulator, regulatory agencies are constrained to deliver relatively efficient regulatory policies. In our view, this optimism is also unrealistic. We build a family of models that explores the possible regulatory outcomes, and use some aspects of Gordon Tullock’s critique of the common law as a conceptual foundation for the analysis of the efficiency of a polycentric regulatory system.

The age of mass migration in Latin America



Abstract: The experiences of Latin American countries are not fully incorporated into current debates concerning the age of mass migration, even though 13 million Europeans migrated to the region between 1870 and 1930. This survey draws together different aspects of the Latin America immigration experience. Its main objective is to rethink the role of European migration to the region, addressing several major questions in the economics of migration: whether immigrants were positively selected from their sending countries, how immigrants assimilated into the host economies, the role of immigration policies, and the long‐run effects of immigration. Immigrants came from the economically backward areas of southern and eastern Europe, yet their adjustment to the host labour markets in Latin America seems to have been successful. The possibility of rapid social upgrading made Latin America attractive for European immigrants. Migrants were positively selected from origin according to literacy. The most revealing aspect of new research is showing the positive long‐run effects that European immigrants had in Latin American countries. The political economy of immigration policies deserves new research, particularly for Brazil and Cuba. The case of Argentina shows a more complex scenario than the classic representation of landowners constantly supporting an open‐door policy.

Do dictatorships redistribute more?



Abstract: This paper examines the effect of political institutions on fiscal redistribution for a country-level panel from 1960–2010. Using data on Gini coefficients before and after government intervention, we apply a measure of effective fiscal redistribution that reflects the effect of taxes and transfers on income inequality. Our findings clearly indicate that non-democratic regimes demonstrate significantly greater direct fiscal redistribution. Subsequently, we employ fiscal data in an attempt to enlighten this puzzling empirical finding. We find that dictatorial regimes rely more heavily on cash transfers that exhibit a direct impact on net inequality and consequently on the difference between market and net inequality (i.e., effective fiscal redistribution), whereas democratic regimes devote a larger amount of resources to public inputs (health and education) that may influence market inequality but not the difference between market and net inequality per se. We argue that the driving force behind the observed differences within the pattern on government spending and effective fiscal redistribution is that democratic institutions lead survival-oriented leaders to care more for the private market, and thus to follow policies that enhance the productivity of the whole economy.

The People’s Perspective on Libertarian-Paternalistic Policies



Abstract: We examine the views toward libertarian-paternalistic (soft) governmental interventions in a series of online experiments conducted in three countries. We use both standard and new methods to elicit attitudes toward soft interventions in various hypothetical scenarios. The majority of the participants accept these types of interventions by the government. However, a substantial proportion opposes them and would prefer that the government simply provide information to help the public make the right choice rather than use a more effective choice architecture intervention. Some even refuse to make the choice that the government promotes, although they would have done so in the absence of the intervention. The opposition to soft interventions appears to be driven by concerns about manipulation and the fear of a slippery slope to nonconsensual interventions. Opposition to soft interventions is reduced when they are implemented by employers rather than the government.

Racial Bias in Bail Decisions



Abstract: This article develops a new test for identifying racial bias in the context of bail decisions—a high-stakes setting with large disparities between white and black defendants. We motivate our analysis using Becker’s model of racial bias, which predicts that rates of pretrial misconduct will be identical for marginal white and marginal black defendants if bail judges are racially unbiased. In contrast, marginal white defendants will have higher rates of misconduct than marginal black defendants if bail judges are racially biased, whether that bias is driven by racial animus, inaccurate racial stereotypes, or any other form of bias. To test the model, we use the release tendencies of quasi-randomly assigned bail judges to identify the relevant race-specific misconduct rates. Estimates from Miami and Philadelphia show that bail judges are racially biased against black defendants, with substantially more racial bias among both inexperienced and part-time judges. We find suggestive evidence that this racial bias is driven by bail judges relying on inaccurate stereotypes that exaggerate the relative danger of releasing black defendants.

Tullock and the welfare costs of corruption: there is a “political Coase Theorem”



Abstract: Gordon Tullock developed an approach to understanding dynamic processes of political change and policy outcomes. The key insight is the notion that political insiders have a comparative advantage—because they face lower transaction costs—in manipulating rules. The result is that political actors can collect revenues from threatening to restrict, or offering to loosen, access to valuable permissions, permits, or services. To the extent that the ability to pay for such favorable treatment is a consequence of private activities that produce greater social value, there is a “political Coase theorem”: corruption makes bad systems more efficient. But the dynamic consequences are extremely negative, because of the inability to institute reforms resulting from application of Tullock’s “transitional gains trap.”

Can fiscal rules constrain the size of government? An analysis of the “crown jewel” of tax and expenditure limitations



Abstract: Fiscal rules attempt to alter budget outcomes by constraining policy makers. They have been one of the primary responses to the recent string of fiscal crises around the globe. We ask if these rules succeed in altering fiscal outcomes by examining what is arguably the most stringent set of fiscal rules in the U.S.—Colorado’s Taxpayer Bill of Rights (TABOR). As TABOR attempts to constrain both taxes and expenditures, we develop a novel approach of estimating treatment effects for multiple outcomes simultaneously using the synthetic control methodology of Abadie et al. (2010). Although there will always be a degree of uncertainty over external validity when a policy is enacted in only a single state, our results provide no evidence that TABOR affected the level of taxes or spending in Colorado and are precise enough to rule out large negative effects. Thus, no support is found for the contention that fiscal rules alter budget outcomes. Instead, TABOR appears to have been partly evaded by policy makers and voters despite its stringency and partly nothing more than a ratification of the state’s preference over the size of its public sector.