Vote buying or (political) business (cycles) as usual?

We study the short-run effect of elections on monetary aggregates in a sample of 85 low and middle income democracies (1975-2009). We find an increase in the growth rate of M1 during election months of about one tenth of a standard deviation. A similar effect can neither be detected in established OECD democracies nor in other months. The effect is larger in democracies with many poor and uneducated voters, and in Sub-Saharan Africa, Latin America, and in East-Asia and the Pacific. We argue that the election month monetary expansion is related to systemic vote buying which requires significant amounts of cash to be disbursed right before elections. The finely timed increase in M1 is consistent with this; is inconsistent with a monetary cycle aimed at creating an election time boom; and it cannot be, fully, accounted for by alternative explanations

On the Political Economy of Green Tax Reforms

This paper offers a political model of green tax reforms in which the use of the revenue from the ecotax is an integrated part. We use the model to explain why and when a link between an ecotax and cuts in other non-environmental taxes can be expected. In our model, green tax swaps arise because a producer lobby group, even if the use of the revenue does not affect profits per se, takes an interest in the allocation of revenue from the ecotax. The reason being that the lobby group uses the allocation of the revenue to reduce the 'price' of other political favours that it cares a lot about. To this end, the lobby group acts in the best interest of the voters, and to the extent the the voters prefer tax cuts on labour income. The paper also analyses the environmental impact of various budgetary procedures and discusses to what extent the revenue from an ecotax can be used to create a constituency in favour of the environmental protection.Political economy, green tax reforms, environmental policy, lobby groups

Strategic Political Participation and Redistribution

The purpose of this paper is to study formation of support and opposition to redistribution. We analyze a society with two groups of citizens and a government. The government distributes income from one group to the other in response to political pressure. The interaction between the groups is modeled as a two-stage game. In stage 1, the groups decide if they want to be politically active. In stage 2, the active group or groups seek influence on the direction and size of the transfer. We demonstrate that supporters of redistribution are always politically active but that opposition is often absent. Moreover, when opposition is absent there is a strong tendency for underdissipation of the transfer, while political competition typically leads to overdissipation. Copyright 2002 Blackwell Publishers Ltd..