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.

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.”

Fired Up by Morality: The Unique Physiological Response Tied to Moral Conviction in Politics



Abstract: Studies provide mounting evidence that morally convicted attitudes elicit passionate and unyielding political responses. Questions remain, however, whether these effects occur because moral conviction is another strong, versus a distinctly moral dimension of attitude strength. Building on work in moral psychology and neuroscience, I argue that moral conviction stems from a distinctive mode of mental processing that is tied to automatic affective reactions. Testing this idea using a lab experiment designed to capture self‐reported moral conviction and physiological arousal, I find that conviction about political objects positively predicts arousal evoked by the objects, while attitude extremity and importance do not. These findings suggest that moral conviction items do tap into moral processing, helping to validate the conviction measure. They also illustrate the value of using physiological indicators to study politics, help explain why morally convicted attitudes trigger such fervent responses, and raise normative questions about political conflict and compromise.

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.

Government extraction and firm size: Local officials’ responses to fiscal distress in China



Abstract: This paper studies how government extraction behaviors respond to local fiscal distress in China. We exploit the 2002 Chinese Income Tax Reform which exogenously cut local government revenues from income taxes roughly by half. We find that, when facing fiscal distress, local officials resort to informal taxes, such as fees and levies, instead of formal taxes to supplement revenue. On average, the increase in informal taxes recovered 75 percent of the local government revenue loss due to the reform. The increases are more pronounced along the intensive margin and are primarily driven by more extractions from large firms. We also find that the reform led to reductions in investment and growth rates of small firms and consistently more small firms in the total size distribution.

The Hayek-Friedman hypothesis on the press: is there an association between economic freedom and press freedom?



Abstract: The Hayek–Friedman hypothesis states that economic freedom is causally associated with stable democracy. I test a particular element of the hypothesis focusing on press freedom, which is arguably a necessary component of any democratic polity. Combining the Freedom House index of press freedom and the Heritage Foundation Index of Economic Freedom yields a large annual panel dataset between 1993 and 2011. Estimates show that improvements in economic freedom are associated with subsequent improvements of press freedom. The overall association is mainly driven by changes in market openness.

The Birth of Pork: Local Appropriations in America’s First Century



Abstract: After describing a newly assembled dataset consisting of almost 9,000 local appropriations made by the U.S. Congress between 1789 and 1882, we test competing accounts of the politics surrounding them before offering a more nuanced, historically contingent view of the emergence of the pork barrel. We demonstrate that for most of this historical period—despite contemporary accusations of crass electoral motives—the pattern of appropriations is largely inconsistent with accounts of distributive politics grounded in a logic of legislative credit-claiming. Instead, support for appropriations in the House mapped cleanly onto the partisan/ideological structure of Congress for most of this period, and only in the 1870s produced the universalistic coalitions commonly associated with pork-barrel spending. We trace this shift to two historical factors: the emergence of a solid Democratic South, and growth in the fraction of appropriations funding recurrent expenditures on extant projects rather than new starts.