Public and Private Welfare State Institutions: A Formal Theory of American Exceptionalism

I construct a model of public policy development, and use the model to explain why the United States has a comparatively small public sector, but instead a large "private welfare state" with employment-based benefits. The key factors are politically organized firms and labor unions. These interest groups can use campaign support to influence a political decision-maker who decides whether to implement a social benefit. In addition, the firms can influence the outcome indirectly by privately providing their own workers with the benefit. This setup leads to three possible outcomes. In the first, no one is provided the social benefit. In the second, all workers receive it through government provision. In the third, some workers receive the policy, through their employers. I argue that the features leading to the third equilibrium correspond closely to political institutions and industry characteristics of the US, while the features of the second equilibrium better describe European countries.Political Economy; Interest Groups; Institutions; Welfare States

Bargaining over a New Welfare State

The goal of this paper is twofold: First, to develop an estimable model of legislative politics in the US Congress, second, to provide a greater understanding of the objectives behind the New Deal. In the theoretical model, the distribution of federal funds across regions of the country is the outcome of bargaining game in which the President acts as the agenda-setter and Congress bargains over the final shape of the spending bill. For any given preferences (of the President) and distribution of seats in Congress, the model delivers a unique predicted allocation. Combined with data on New Deal programs, this is used to estimate the objectives of the Roosevelt administration. The results indicate that economic concerns for relief and recovery, though not necessarily for fundamental reform and development, largely drove New Deal spending. Political concerns also mattered, but more on the margin.Political Economy; LegislativeBargaining; New Deal; US Congress; Public Spending

Why do we still measure state fragility?

Measuring and monitoring countries that are fragile is a rapidly growing but complicated task. Quantifying state fragility or any concept that is highly complex is loaded with theoretical assumptions, principles and definitions that may differ substantially across indices. This paper explains why the fragility community remains invested in expanding the concept of fragility, presents an updated stocktaking of the existing fragility indices and evaluates them using the framework approach. Reviewing the selected indices reveals that they can be indeed a source of useful signal. However, there can also be worthless noise associated with these indices because of the identified cross-reference issue between the indices, problems of double-counting or time lag in data. The paper argues that it would rather complicate than aid to believe that there is a particular index that is better than another. Instead, it encourages a more nuanced understanding of different fragility indices and concludes with offering insights into how to make sense of them

Holding on?:Ethnic divisions, political institutions and the duration of economic declines

We analyze the duration of large economic declines and provide a theory of delayed recovery. We show theoretically that uncertain post-recovery incomes lead to a commitment problem which limits the possibility of cooperation in ethnically heterogeneous countries. Strong constraints on the executive solve this problem by reducing the uncertainty associated with cooperative behavior. We test the model using standard data on linguistic heterogeneity and detailed data on ethnic power configurations. Our findings support the central theoretical prediction: countries with more constrained political executives experience shorter economic declines. The effect is large in ethnically heterogeneous countries but virtually non-existent in homogeneous societies. Our main results are robust to a variety of perturbations regarding the estimation method, the estimation sample, measures of heterogeneity, and measures of institutions

The Political Economy of Sovereign Debt: Global Finance and Electoral Cycles

Political economy theory expects politicians to use budget deficits to engineer an election-timed boom, known as the political business cycle. We challenge and contextualize this view by incorporating the financial constraints faced by governments into an electoral framework. We argue theoretically that the extent of ownership dispersion among creditors has important effects for governments' policy autonomy. Specifically, we contend that when highly indebted governments become more reliant on international bond marketsas opposed to traditional bank lendingpoliticians alter the way they respond to domestic constituents. In an econometric test of 16 Latin American countries, from 1961 to 2011, we show that financial decentralization breeds austerity. More specifically, we find that politicians exhibit more fiscal discipline when they fund a greater share of their spending through decentralized bond markets. Furthermore, we find this disciplining effect to be particularly strong during election periods

Small-world conservatives and rigid liberals: Attitudes towards sharing in self-proclaimed left and right

We experimentally explore the way political preferences shape giving behavior. We find no difference in average giving between the left and the right in a dictator game environment. However, we find the reasons for giving to be different. Right-leaning individuals give according to a norm-dependent utility that takes into account the beliefs of the receiver. The behavior of left-leaning individuals is not shaped by such an interaction between norms and beliefs. We conclude that right-wingers choose in accordance with a “small world” view, where giving is shaped by social interaction, while left-wingers appear rigid in their reaction to social context