Checks and balances: an assessment of the institutional separation of political powers in Colombia

In this paper, we evaluate the institutional and legal structure of the Colombian government. In particular, we want to assess how a system of institutional checks and balances can be structured to promote the rule of law, preserve property rights, and stimulate economic growth. The 1991 Constitution indeed makes commendable commitments to these objectives. Yet, due to its institutional structure, Colombia is governed in a manner that is both unchecked and unbalanced. The Colombian Constitution is an enormously long document that attempts to reassure all parties that the future will be to their liking. For example, Article 58, which permits uncompensated expropriation for reasons of “equity”, might be a substantial deterrent to investment. The nation’s long run economic health may be seriously impaired if peace is bought at the price of widespread concessions with regard to either the process of decision-making about the economy or to the specific content of future government economic policies. One may buy transitory tranquility, which may not translate in to lasting peace, at the price of long-term instability and turmoil. We make recommendations for institutional reform, which aim to mitigate clientelist and populist trends in Colombian politics. To enhance policymaking by reducing the scope for gridlock, we propose measures such as long-term appointments and ballot accountability that eliminate distortions to the voting incentives of both judges and lawmakers. Also, procedures are set forth to limit undue deliberations by the judiciary and to induce institutional status-quo bias. While we support constitutional provisions for the stability of a political process endowed with representativeness, we reject constitutional provisions that attempt to entrench one particular policy outcome. Stationary policy is likely to be both suboptimal and unsustainable in a stochastic and dynamic environment

The Political Economy of Debt Moratoria, Bailouts and Bankruptcy

This paper develops a simple dynamic general equilibrium model of an agricultural economy, in which poor farmers borrow wheat from rich farmers to invest in their land. Since wheat output is stochastic (we allow for both idiosynchratic and aggregate shocks) there may be default ex-post. The main thrust of the paper is to compare equilibria in this economy with and without political intervention. This intervention is decided through majority voting and can take the form of a bailout or a moratorium. The results of our formal analysis are confronted with historial evidence from the Panic of 1819 in the U. S. With no aggregate uncertainty, the main results of the formal analysis are that allowing for debt moratoria and bailouts not only always improves ex-post efficiency but may improve ex-ante efficiency. Anticipated bailouts always occur in equilibrium and moratoria never occur, but the threat of moratoria enhances efficiency. With aggregate uncertainty, the differences between moratoria and bailouts may collapse, with both occurring only in bad times and improving ex-ante efficiency.

Partisan Cycles in Congressional Elections and the Macroeconomy

The post-war United States exhibits two rather strong politico-economic regularities. The political regularity is that the party of the President has always lost votes in aid-term Congressional elections, relative to its Congressional vote in the previous elections; the economic regularity is that Republican administrations exhibit below average economic growth in the first half of each term and Democratic administrations are associated with above average growth in their first half. In the second halves economic growth is similar under the two administrations. We provide a rational expectations model which can explain these two regularities. In Presidential elections voters have to choose between two polarized candidates; mid-term elections are used to counterbalance the President's policies by strengthening the opposition in Congress. Since presidents of different parties are associated with different economic policies, our model predicts a (spurious) correlation between the state of the economy and elections. The predictions of our model are in sharp contrast with those of traditional retrospective voting models in which voters simply reward the incumbent if the economy is doing well immediately before the election. Our empirical results suggest that our model performs at least as well and often better than alternative models. In addition, we question previous claias that voters are short sighted and naively backward looking.

Checks and balances: an assessment of the institutional separation of political powers in Colombia

In this paper, we evaluate the institutional and legal structure of the Colombian government. In particular, we want to assess how a system of institutional checks and balances can be structured to promote the rule of law, preserve property rights, and stimulate economic growth. The 1991 Constitution indeed makes commendable commitments to these objectives. Yet, due to its institutional structure, Colombia is governed in a manner that is both unchecked and unbalanced. The Colombian Constitution is an enormously long document that attempts to reassure all parties that the future will be to their liking. For example, Article 58, which permits uncompensated expropriation for reasons of “equityâ€, might be a substantial deterrent to investment. The nation’s long run economic health may be seriously impaired if peace is bought at the price of widespread concessions with regard to either the process of decision-making about the economy or to the specific content of future government economic policies. One may buy transitory tranquility, which may not translate in to lasting peace, at the price of long-term instability and turmoil. We make recommendations for institutional reform, which aim to mitigate clientelist and populist trends in Colombian politics. To enhance policymaking by reducing the scope for gridlock, we propose measures such as long-term appointments and ballot accountability that eliminate distortions to the voting incentives of both judges and lawmakers. Also, procedures are set forth to limit undue deliberations by the judiciary and to induce institutional status-quo bias. While we support constitutional provisions for the stability of a political process endowed with representativeness, we reject constitutional provisions that attempt to entrench one particular policy outcome. Stationary policy is likely to be both suboptimal and unsustainable in a stochastic and dynamic environment. Keywords; separation of powers, political representativeness, clientelism and gridlock JEL Classification: E61, H11, H77

Why Are There So Many Divided Senate Delegations?

The last three decades have witnessed a sharp increase in the number of states with spilt Senate delegations, featuring two senators of different parties. In addition, there is evidence that senators of different parties do not cluster in the middle: they are genuinely polarized. We propose a model which explains this phenomenon. Our argument builds upon the fact that when a Senate election is held, there is already a sitting senator. If the voters care about the policy position of their state delegation in each election, they may favor the candidate of the party which is not holding the other seat. We show that, in general: (1) a candidate benefits if the non-running senator is of the opposing parry; (2) the more extreme the position of the non-running senator, the more extreme may be the position of the opposing party candidate. Our 'opposite party advantage' hypothesis is tested on a sample including every Senate race from 1946 to 1986. After controlling for other important factors, such as incumbency advantage, coattails end economic conditions, we find reasonably strong evidence of the 'opposite party advantage.'

Repeated Play, Cooperation and Coordination: An Experimental Study

An experiment was conducted to test whether discounted repeated play leads to greater cooperation and coordination than one-shot play, in a public good environment with incomplete information. The experiment was designed so that, theoretically repeated play can sustain equilibria with higher group earnings than result in the one-shot Bayesian Nash equilibrium. The design varied a number of environment al parameters, including the size of the group, the marginal rate of transformation between the public and private good, and the statistical distribution of marginal rates of substitution between the public and private good. Marginal rates of substitution were private information but the statistical distribution was common knowledge. The results indicate that repetition leads to greater cooperation, and that the magnitude of these gains depends both on the ability of players to monitor each other's strategy and on the underlying environmental parameters

The Polarization of American Politics

Elected officials in the United States appear to represent relatively extreme support coalitions rather than the interests of middle-of-the-road voters. This contention is supported by analysis of variance of liberal-conservative positions in the United States Senate from 1959 to 1980. Within both the Democratic and the Republican parties, there is considerable variation in liberal-conservative positions, but two senators from the same state and party tend to be very similar. In contrast, senators from the same state but from different parties are highly dissimilar, suggesting that each party represents an extreme support coalition in the state. Moreover, the distribution of senators is now consistent with the hypothesis that, in the long run, both parties have an equal chance of winning any seat in the Senate. This result suggests that there is now competition between equally balanced but extreme support coalitions throughout most of the United States

Private Incentives in Social Dilemmas: The Effect of Incomplete Information and Altruism

This paper analyzes the provision of discrete public goods when individuals have altruistic preferences which others do not precisely know. The problem is formulated and solved as a Bayesian game. In contrast to standard social psychological approaches, based on such natural language terms as greed, fear, and trust, the Bayesian approach provides a rigorous mathematical treatment of social participation. This theory is shown to make strong testable predictions that can integrate data collected across a wide variety of natural and experimental settings. The al truism model is shown to be supported by existing experimental data on binary voluntary contribution games