Trade Liberalization and Industrial Concentration:Evidence from Brazil

This paper applies an endogenous lobby formation model to explain the extent of trade protection granted to Brazilian manufacturing industries during the 1988-1994 trade liberalization episode. Using a panel data set covering this period, we find that even in an environment in which a major regime shift has been introduced,more concentrated sectors have been able to obtain policy advantages, that lead to a reduction in international competition. The importance of industry structure appears to be substantial: In our baseline speci.cation, an increase in concentration by 20% leads to an increase in protection by 5%-7%.lobby formation; tariffs

Dual Track Liberalization: With and Without Losers

Dual track liberalization, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, the reform implements an outcome that is both Pareto improving and e±ciency enhancing as compared to the status quo. We show that when the reform is anticipated, intertemporal arbitrage arises potentially undermining these properties. Only when the original policy involves both price setting and quantity restrictions can anticipated dual track liberalization maintain its attractiveness. These conditions correspond well to the circumstances faced by transition economies.http://deepblue.lib.umich.edu/bitstream/2027.42/40047/3/wp661.pd

Reforming Legislatures: Is one House better than two?

During the last decade unicameral proposals have been put forward in fourteen US states. In this paper we propose a theoretical framework casting some lights on the drawbacks of bicameral state legislatures and on the effects of the proposed constitutional reforms. In a setting where lawmakers interact with a lobby through a bargaining process and with voters by means of elections, we show that when time constraints are binding, bicameralism might lead to a decline in the legislator's bargaining power vis-à-vis the lobby and to a reduction in his electoral accountability. On the other hand, when the time constraint is not binding, bicameralism might improve electoral accountability. Hence, arguments suggesting that bicameralism is a panacea against the abuse of power by elected legislators should be taken with due caution and the proposed unicameral reforms in US states may indeed reduce corruption levels among elected representatives.bicameralism, corruption, lobbying, bargaining, elections

Dual Track Liberalization: With and Without Losers

Dual track liberalization, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, the reform implements an outcome that is both Pareto improving and e±ciency enhancing as compared to the status quo. We show that when the reform is anticipated, intertemporal arbitrage arises potentially undermining these properties. Only when the original policy involves both price setting and quantity restrictions can anticipated dual track liberalization maintain its attractiveness. These conditions correspond well to the circumstances faced by transition economies.Dual Track Liberalization, Intertemporal Arbitrage, Pareto Improving Reforms, China

Dual Track Liberalization: With and Without Losers

The success of the Chinese economic reforms has been linked by many observers to the implementation of a dual track liberalization mechanism. This approach, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, it implements an outcome that is both Pareto improving and e?ciency enhancing as compared to the status quo. When the reform is instead anticipated, intertemporal arbitrage arises, potentially undermining these properties. Only when the original policy involves both price setting and quantity restrictions can anticipated dual track liberalization maintain its attractiveness. While these conditions correspond well to the circumstances faced by transition economies, our analysis invites some caution as for the further applicability of the Chinese approach to economic reform.Dual Track Liberalization, Intertemporal Arbitrage, Pareto Improving Reforms, China

What Drives U.S. Immigration Policy? Evidence from Congressional Roll Call Votes

Immigration is one of the most hotly debated policy issues in the United States today. Despite marked divergence of opinions within political parties, several important immigration reforms were introduced in the post 1965 era. The purpose of this paper is to systematically analyze the drivers of congressional voting behavior on immigration policy during the period 1970-2006, and in particular, to assess the role of economic factors at the district level. Our findings provide robust evidence that representatives of more skilled labor abundant constituencies are more likely to support an open immigration policy concerning unskilled labor. Thus, a simple factor-proportions-analysis model provides useful insights regarding the policy making process on one of the most controversial facets of globalization.immigration policy, voting, political economy

Who is Against a Common Market?

This paper develops a theory of the endogenous formation of a common market in a three-country, two-factor political economy model. In the status quo, Home and Foreign implement non-discriminatory policies towards international factor flows, as to maximize the domestic median voter\'s welfare. Each of the two countries simultaneously holds then a referendum on a Common Market initiative leading to the removal of the pre-existing policies for factor flows occurring between the member countries, while no coordination is imposed on policies vis-µa-vis the rest of the world. Several interesting results emerge. In a common market, factors moving between the members are more likely to gain, the bigger is the import demand of one country as compared to the factor supply of the exporting partner. Factors which instead do not relocate are more likely to see their return decrease when flows are big and import demands are inelastic. Importantly, for the common market to emerge as an equilibrium, some factors must continue to experience enhanced protection when the integration process is completed. This result highlights the potential tension between social desirability and political feasibility of the integration process.Economic Integration, Factor Mobility, Political Economy

What drives US Immigration Policy? Evidence from Congressional Roll Call Votes

Immigration is today one of the most hotly debated policy issues in the United States. Despite marked divergence of opinion even within political parties, several important reforms have been in-troduced in the post 1965 era. The purpose of this paper is to carry out a systematic analysis of the drivers of the voting behavior of US representatives on immigration policy in the period 1970-2006, and in particular to assess the role of economic factors at the district level. Our findings suggest that representatives from more skilled labor abundant districts are more likely to support an open immi-gration policy towards the unskilled, whereas the opposite is true for representatives from more un-skilled labor abundant districts. This evidence is robust to the introduction of an array of additional economic and non-economic characteristics of the districts, and suggests that a simple factor analy-sis model can go a long way in explaining the voting behavior on immigration policy.Immigration policy, Voting, Political Economy

The rhetoric of closed borders: quotas, lax enforcement and illegal migration

In 2008, approximately 12 million immigrants lived illegally in the United States, and large numbers of undocumented foreigners resided also in other advanced destination countries. Hence, attempts at controlling immigration flows seem to often fail. If governments are not enforcing their "official" immigration policy, why do they set such a policy in the first place? The purpose of this paper is to address this apparent puzzle, using a political agency framework. We consider a setting in which there is uncertainty on the supply of migrants, and the policy maker who faces elections can be of one of two types. Either he has preferences congruent with the median voter, or he desires a larger number of migrants, because he is interested in the maximization of social welfare or has fallen prey to a pro-immigration lobby. We show that, if the incumbent wants to admit more migrants than the median voter, he might find it optimal to announce a binding quota to be re-elected, and strategically relax its enforcement. The control of migration flows can take place at the border or domestically, and we argue that even if the former is less effective as a policy tool, it might be chosen in equilibrium. Thus, our model illustrates how strategic considerations by elected officials play an important role in explaining both the observed large number of illegal immigrants and lax enforcement.Illegal immigration, Immigration Policy, Political Economy.

Dual Track Reforms: With and Without Losers

The dual track approach to market liberalization has been widely recognized as the key to the success of the Chinese economic reform. In this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete. We show that in a dynamic context intertemporal arbitrage will emerge, potentially resulting in efficiency losses and/or adverse distributional effects. Only when the status quo involves both price and quantity interventions by the government can dual track liberalization maintain its appeal. Our analysis thus suggests some caution as for the broader applicability of this reform mechanism.Dual Track Liberalization, Intertemporal Arbitrage, Pareto Improving Reforms, China