Economic reforms and political constraints: on the time inconsistency of gradual sequencing.

This paper presents a model portraying a country in a political deadlock about reform proposals that hurt strongly organized interest groups. We show that, under sorne circumstances (no ability to precommit, veto power by interest groups), only far reaching reforms (even if quite costly) have hope of success. The model intends to explain why in recent years several Latin American countries have gone for radical reform.

The Making of Policy: Institutionalized or Not?

This paper develops a framework for analyzing different policymaking styles, their causes and their consequences in Latin America, finding that lower institutionalization and greater use of alternative political technologies (APTs) are more likely the lower the cost of using these technologies, the higher the potential damage they can cause, the lower the wealth of the economy, and the more asymmetric the distribution of de jure political power. Moreover, strategic complementarity exists in the use of alternative political technologies; for instance "bribes by the rich" and "protests by the poor" are likely to be countervailing forces, and will both occur in polities with weaker political institutions.Political institutions, Public policies, Institutional strength, Protests, Alternative Political Technologies, Development, Judicial independence, Party institutionalization, Congress capabilities, Cabinet stability, Corruption

Fiscal Rules for Subnational Governments. Some organizing principles and Latin American experiences

In this paper we investigate the logic and the workings of fiscal rules, with focus on rules for subnational governments. We argue against a simplistic view that sees the writing of numerical limits on fiscal variables as the solution to fundamental fiscal problems. We suggest that international organizations should take a more comprehensive approach when dealing with the fiscal problems of developing countries. Such an approach requires a deep understanding of the determinants of undesirable fiscal outcomes in each particular case, which in turn requires some explicit political analysis.fiscal rules, fiscal policy

Why is Argentina’s Fiscal Federalism so Inefficient? Entering the Labyrinth

A long-standing concern in political economy is whether outcomes are efficient in political equilibrium. Recent contributions have examined the efficiency/inefficiency of policy choices from a theoretical point of view. The aim of this paper is to examine such issue empirically. Building on existing "economic" diagnoses that highlight the deficient incentives present in Argentina’s Federal Tax-Sharing Agreement the paper will attempt to understand the politics behind its adoption and persistence. We suggest an explanation based on the transaction costs of Argentina’s political market. Although potentially Pareto-improving policies could have been adopted, they were not introduced because of the uncertainty over the future status of today’s bargains, and given the lack of institutions to enforce bargains among the political actors. The paper concludes offering some preliminary ideas for institutional engineering: what governance structures could help reduce these transaction costs? The purpose is to create an institutional framework in which political actors could negotiate among themselves, ensuring the enforceability of agreements, in order to achieve more efficient outcomes.

Missed Expectations: The Argentine Convertibility

This paper studies the process that led to the Argentine crisis. The crisis is understood as a major disappointment of previous expectations, indicated by widespread insolvencies and abrupt declines in consumption. The analysis concentrates on the sequence of public and private decisions, and the varying perceptions and policy incentives that motivated them. In the nineties Argentina searched for a new growth trend. During much of the period, the behavior of agents seemed to be based on the anticipation that current and future incomes could sustain a value of domestic spending much higher than in the past. The government was motivated to reinforce those expectations, for signaling and political economy reasons. The convertibility monetary regime not only provided a very visible nominal anchor, but also operated as a basic framework for financial contracts, mostly denominated in dollars. Dollar contracting implicitly presumed that the dollar value of incomes would support the servicing of debts. Despite precautionary measures, the reliance on the sustainability of the real exchange rate increased over time. In the late nineties exports stopped rising and the foreign supply of credit tightened. Facing these contraints, the economy contracted and the solvency of the government was put into question. The financial system was vulnerable both in the event of devaluation and that of a (large) deflation-cum-adjustment. As was implicit in its design and management, convertibility proved to have very large exit costs.http://deepblue.lib.umich.edu/bitstream/2027.42/39900/3/wp515.pd

Political Institutions, Policymaking, and Economic Policy in Latin America

This paper surveys selected themes in the political economy of policymaking in Latin America, with an emphasis on recent research focusing on actual decision and implementation processes, and on the political institutions and state and social actors involved in those processes. In particular, the paper addresses how political rules work for or against intertemporal cooperation among political actors. The document shows that the extent to which polities obtain the key policy features that seem to determine development depends on the workings of political institutions, which define how the policymaking game is played, on the characteristics of the arenas of interaction, which define where the policymaking game is played, and on certain characteristics of key socioeconomic groups, which define who interacts with professionalpoliticians in pursuing different policy preferences.Political institutions, Public policies, Economic policy, Government capabilities, Development, Latin America

Judicial lobbying: The politics of labor law constitutional interpretation

This paper links the theory of interest groups influence over the legislature with that of congressional control over the judiciary. The resulting framework reconciles the theoretical literature of lobbying with the negative available evidence on the impact of lobbying over legislative outcomes, and sheds light to the determinants of lobbying in separation-of-powers systems. We provide conditions for judicial decisions to be sensitive to legislative lobbying, and find that lobbying falls the more divided the legislature is on the relevant issues. We apply this framework to analyze supreme court labor decisions in Argentina, and find results consistent with the predictions of the theory

Veto Players and Policy Trade-Offs- An Intertemporal Approach to Study the Effects of Political Institutions on Policy

The capacity to sustain policies over time and the capacity to adjust policies in the face of changing circumstances are two desirable properties of policymaking systems. The veto player approach has suggested that polities with more veto players will have the capacity to sustain policies at the expense of the ability to change policy when necessary. This paper disputes that assertion from an intertemporal perspective, drawing from transaction cost economics and repeated game theory and showing that some countries might have both more credibility and more adaptability than others. More generally, the paper argues that, when studying the effects of political institutions on policy outcomes, a perspective of intertemporal politics might lead to predictions different from those emanating from more a-temporal approaches.Political institutions, Public policies, Veto players, Policy adaptability, Policy stability, Intertemporal, Credibility, Repeated games

Political Institutions and Street Protests in Latin America

This paper argues that where institutions are strong, actors are more likely to participate in the political process through institutionalized arenas, while where they are weak, protests and other unconventional means of participation become more appealing. This relationship is explored empirically by combining country-level measures of institutional strength with individual-level information on protest participation in 17 Latin American countries. Evidence is found that weaker political institutions are associated with a higher propensity to use alternative means for expressing preferences, that is, to protest. Also found are interesting interactions between country-level institutional strength and some individual-level determinants of participation in protests.Political institutions, Public policies, Institutional strength, Protests, Alternative Political Technologies, Political party representation, Ideology, Ideological extremism, Latin America

Political Institutions, State Capabilities and Public Policy - International Evidence

This paper introduces preliminary evidence from a cross-country database of policy characteristics and potential uses of that database. While most databases have emphasized either the content of policies (e.g., size of government deficits) or countries’ formal institutions (e.g., political regime, electoral system), the variables in this database reflect the policymaking capabilities of different polities. The paper attempts to explain these policy characteristics as depending on the workings of political institutions, using a logic emphasizing intertemporal political compromise. The paper also contrasts this logic with alternatives such as the veto players approach. The paper concludes by suggesting the use of these policy characteristics or state capabilities as explanatory variables for the effectiveness of public spending in various social areas.Political institutions, Public policies, Government capabilities, Veto players, Intertemporal cooperation, Development, Human Development Index, Public expenditures, Policy index, Adaptability, Stability, Judicial independence, Party institutionalization, Congress capabilities, Cabinet stability