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5221. The Spread of Neoliberalism: U.S. Economic Power and the Diffusion of Market-Oriented Tax Policy

Author:
Duane Swank
Publication Date:
03-2005
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
I offer an explanation for the widespread diffusion of neoliberal tax policies in the developed democracies. Specifically, I argue that the highly visible 1980s market-conforming tax reform in the United States, the late twentieth century's dominant political economy, creates significant incentives for adoption of neoliberal tax policies by decision makers in other polities. As such, I stress a dominant actor model of the diffusion of neoliberalism that is grounded in asymmetric competition for mobile assets and policy learning. However, while the incentives to follow U.S. tax policy are substantial, the relative weight assigned the costs and benefits of reform and, in turn, the pace and degree of neoliberal policy adoption by other nations is fundamentally contingent on features of domestic political and economic environments. I assess these arguments with empirical models of 1981-to-1998 tax rates on capital in sixteen nations. I find that changes in U.S. tax policy influence subsequent reforms in other polities; in the long-term, all nations move toward the U.S. neoliberal tax structure. Analysis also shows, however, that the responsiveness to US tax reforms is notably greater where linkages with U.S. markets are stronger, where domestic economic stress is deeper, and where uncoordinated market institutions are dominant. I conclude with a discussion of the implications of the present analysis for the volume's central questions: are dominant. I conclude with a discussion of the implications of the present analysis for the volume's central questions: of international policy interdependence and domestic political economic forces in shaping policy change?
Topic:
Economics and Politics
Political Geography:
United States and Europe

5222. Is Europe Becoming the Most Dynamic Knowledge Economy in the World?

Author:
Daniele Archibugi and Alberto Coco
Publication Date:
01-2005
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
The paper discusses the condition and perspective of the European Union in the knowledge economy and the feasibility of the goal given by the European Council at the Summits held in Lisbon (March 2000) and Barcelona (March 2002), that is, to increase European R expenditure up to 3 percent of GDP by 2010. The paper focuses on two aspects: comparative performance with its direct counterparts, in particular the US..; and intra-European distribution of resources and capabilities. A set of technological indicators is presented to show that Europe is still in a consistent delay when compared to Japan and the U.S., especially in R investment and in the generation of innovations. A small convergence occurs in the diffusion of Information and Communication Technologies (ICTs), the sector most directly linked to the concept of the "new economy." In the field of knowledge collaboration, Europe reveals opposing paths in the business and in the academic worlds. Within Europe, the level of investment in scientific and technological activities is so different across countries that it does not merge into a single continental innovation system.
Topic:
International Relations, Economics, and Science and Technology
Political Geography:
Europe and Lisbon

5223. The Challenges of EU Accession for Post-Communist Europe

Author:
David R. Cameron
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
The accession of ten new member states in May 2004 and the prospective accession of several more in the near future will pose severe budgetary, administrative, and operational challenges for the European Union. But however great, the challenges of enlargement pale in comparison with the challenges of accession that will be faced by the new member states, especially those which until a decade ago were governed by Communist parties that presided over centrally-planned and predominantly-collectivized economies. This paper explores five of the most critical challenges that will face the new member states of post-Communist Europe: 1) administering the acquis; 2) deepening and extending the reform and transformation of the economy; 3) reducing the high levels of unemployment and large government, trade, and current account deficits; 4) financing accession in the face of the EU’s budgetary constraints and financial provisions; and 5) coping with all of those challenges in the face of low levels of support for enlargement in many of the member states and high levels of ambivalence and skepticism about membership in most of the new member states. The chapter concludes by noting the low levels of trust in the national government and satisfaction with the way democracy works that exist in most of the new member states and suggests that those low levels of trust and satisfaction will make it difficult for the governments in the new member states to address these challenges while also maintaining sufficient public support to retain office.
Topic:
Economics and Government
Political Geography:
Europe

5224. Measuring Risk: Political Risk Insurance Premiums and Domestic Political Institutions

Author:
Nathan Jensen
Publication Date:
09-2005
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
There is a resurgence in the literature in political science on how political risk affects multinational corporations operating in emerging markets. Most existing studies suffer from data problems where researchers can only offer indirect evidence of the relationship between political institutions and political risk. In this paper I utilize a new data resource to explore how domestic institutions affect political risks for multinationals. Utilizing price data from political risk insurance agencies I test how domestic political institutions affect the premiums multinationals pay for coverage against 1) expropriations and contract disputes and 2) government restrictions on capital transactions. I find that constraints on politicians lead to marginally lower expropriation and transfer risks. Democracy, on the other hand, greatly reduces expropriation risk but has no impact on transfer risk.
Topic:
Economics, Government, Political Economy, and Politics

5225. The Bargain of the Unstable: Trade Negotiations and Financial Crises in Mercosur 1995-2001

Author:
Pablo Heidrich
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
Center for International Studies, University of Southern California
Abstract:
Argentina and Brazil suffered grave financial crises during the 1990s. During that time, they were involved in trade negotiations with each other inside Mercosur. As the financial crises struck one or the other country, their negotiating positions varied from accommodating to aggressive, leading to peaks of confrontation from which Mercosur has not quite recovered yet. Furthermore, those crises provoked a large number of trade disputes as protectionism from both countries grew when the crises increasingly hurt their economies.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Brazil, Argentina, and Latin America

5226. Taxing Business-to-Consumer Interstate Remote Retail Sales: Economics v. Jurisprudence in the Battle Over Tax Jurisdiction

Author:
Jeptha Nafziger
Publication Date:
05-2005
Content Type:
Working Paper
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
Retail sales and use taxes constitute a major component of state and local tax bases, providing critical funds for many public programs. The continued and increasing significance of nontaxed remote retail sales—interstate sales of goods by firms without sufficient presence in the destination jurisdiction—has put the long-term solvency of these tax bases and the public programs they fund in jeopardy. To a considerable extent, this problem is attributable to the oft-criticized “nexus” standard, a legal concept that limits a jurisdiction’s ability to tax remote transactions based on constitutional and stare decisis grounds. This paper offers a summary of the jurisprudence that has yielded the current nexus interpretation, an economic critique of its underlying principles, and several recommendations that could serve as policy alternatives to the status quo.
Topic:
Economics, Business, Tax Systems, Jurisdiction, Retail, Consumer Behavior, and Jurisprudence
Political Geography:
North America and United States of America

5227. Trends in Competitive Balance: Is there Evidence for Growing Imbalance in Professional Sport Leagues?

Author:
Arne Feddersen and Wolfgang Maennig
Publication Date:
01-2005
Content Type:
Working Paper
Institution:
Chair for Economic Policy, University of Hamburg
Abstract:
The concept of competitive balance is a central aspect in the literature of sports economics. A popular argumentation of sport functionaries is that dominance of one or a few teams could lead to unequal incomes for the clubs, restrictions in the clubs’ ability to improve sporting performance and ultimately to a loss of attractiveness and loss of income for the league. Following this line of reasoning and alleging a negative trend in competitive sports functionaries often try to implement regulations in team sport leagues. The aim of this paper is to analyze for eight different leagues if there is such a trend existing. For an empirical test for trends in competitive balance of four European soccer leagues (ENG, ESP, GER, ITA) and four US Major Leagues (MLB, NBA, NFL, NHL), OLS regressions with a constant were carried out. For the entire observation period from 1969/70 to 2003/2004, of 48 trends ascertained, only 12 could be observed as being significantly positive (i.e. growing imbalance) with 19 significantly negative (i.e. growing balance). The remaining 17 trends were insignificantly different from zero.
Topic:
Economics, Sports, Soccer, Competitive Balance, and Sports Leagues
Political Geography:
Europe, Global Focus, and United States of America

5228. Slow Passthrough Around the World: A New Import for Developing Countries?

Author:
Jeffrey Frankel, David Parsley, and Shang-Jin Wei
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Developing countries traditionally experience passthrough of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors’ products, and the general CPI. But developing countries in the 1990s experienced a rapid downward trend in the degree of passthrough and speed of adjustment, more so than did high-income countries. As a consequence, slow and incomplete passthrough is no longer exclusively a luxury of industrial countries. Using a new data set -- prices of eight narrowly defined brand commodities, observed in 76 countries -- we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the passthrough coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in passthrough to imported goods prices, and in turn to competitors’ prices and the CPI, can be explained by changes in the monetary environment – including a fall in long-term inflation. Real wages work to reduce passthrough to competitors’ prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the passthrough coefficient in some developing countries.
Topic:
Economics, Markets, Developing World, Tariffs, Exchange Rate Policy, and Inflation
Political Geography:
Global Focus

5229. Contractionary Currency Crashes In Developing Countries

Author:
Jeffrey Frankel
Publication Date:
02-2005
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
To update a famous old statistic: a political leader in a developing country is twice as likely to lose office in the 6 months following a currency crash as otherwise. This difference, which is highly significant statistically, holds regardless whether the devaluation takes place in the context of an IMF program. Why are devaluations so costly? Many of the currency crises of the last ten years have been associated with output loss. Is this, as alleged, because of excessive reliance on raising the interest rate as a policy response? More likely it is because of contractionary effects of devaluation. There are various possible contractionary effects of devaluation, but it is appropriate that the balance sheet effect receives the most emphasis. Passthrough from exchange rate changes to import prices in developing countries is not the problem: this coefficient fell in the 1990s, as a look at some narrowly defined products shows. Rather, balance sheets are the problem. How can countries mitigate the fall in output resulting from the balance sheet effect in crises? In the shorter term, adjusting promptly after inflows cease is better than procrastinating by shifting to short-term dollar debt, which raises the costliness of the devaluation when it finally comes. In the longer term, greater openness to trade reduces vulnerability to both sudden stops and currency crashes.
Topic:
Debt, Economics, Developing World, Exchange Rate Policy, Currency, and Devaluation
Political Geography:
Global Focus

5230. Why is Mobility in India so Low? Social Insurance, Inequality, and Growth

Author:
Kaivan Munshi and Mark Rosenzweig
Publication Date:
07-2005
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
This paper examines the hypothesis that the persistence of low spatial and marital mobility in rural India, despite increased growth rates and rising inequality in recent years, is due to the existence of sub-caste networks that provide mutual insurance to their members. Unique panel data providing information on caste loans and sub-caste identification are used to show that households that out-marry or migrate lose the services of these networks, which dampens mobility when alternative sources of insurance or finance of comparable quality are unavailable. At the aggregate level, the networks appear to have coped successfully with the rising inequality within sub-castes that accompanied the Green Revolution. Indeed, this increase in inequality lowered overall mobility, which was low to begin with, even further. The results suggest that caste networks will continue to smooth consumption in rural India for the foreseeable future, as they have for centuries.
Topic:
Economics, Inequality, Economic Growth, Mobility, and Insurance
Political Geography:
South Asia and India