What GovernmentsMaximize
and Why: The View fromTrade
KishoreGawande,PravinKrishna,
and MarceloOlarreaga
Abstract Policymaking
toredistribute
incometopowpowerenablesgovernments
in society.However,some governments
erfulinterests
exhibitgreaterconcernfor
behaviormayitselfbe endogenously
aggregatewelfarethanothers.Thisgovernment
determined
factors.Tradepolby a numberof economic,political,and institutional
redistributive,
providesa valuable contextin whichthe
icy,being fundamentally
ofgovernments
welfare-mindedness
evaluated.Thisarticleinvesmaybe empirically
thewelfare-mindedness
of governments
and attempts
to undertigatesquantitatively
of thedifferences
in government
determinants
standthesepoliticaland institutional
behavioracrosscountries.
are endowedwithpolicymaking
powersto redistribute
Althoughall governments
in society,some governments
exhibitgreaterconincometo powerfulinterests
behaviormayitselfbe endogcernforaggregatewelfarethanothers.Government
factors.
enouslydetermined
by a numberof economic,political,and institutional
For instance,in thepresenceof a weak systemof checksand balancesor a low
to redistribute
it may be easier forgovernments
level of politicalcompetition,
resourcestowardthosespecialinterests
theyfavor.It is thegoal of thisarticleto
ofgovernments
in a largesamtherelativewelfare-mindedness
studyquantitatively
in government
behavior
thedifferences
and to tryand understand
ple of countries
factors.
acrosscountriesusingeconomic,political,and institutional
theextentto whichgovWe proceedin two steps.The firststepis to quantify
are concernedwithaggregatewelfarerelativeto anyotherprivateinterernments
are
ests. This requiresdata in whichthe redistributive
powersof governments
tradeoff
betweenaggregateand private
and whichreflecttheparticular
inherent,
as thecontextin which
In ouranalysis,we use tradepolicydetermination
interest.
FinancialsupportfromtheWorldBank's DECRS grantis acknowledged.The views are entirely
thoseof the authorsand not theWorldBank's. We are gratefulto the editorsand two anonymous
We thankseminarparwhichimprovedthepaperconsiderably.
refereesfortheirinsightful
comments,
ticipantsat the2006 SouthernEconomicAssociationMeetings,the2007 AmericanPoliticalScience
of Toronto,Texas A&M, WorldTradeOrganization(Geneva),and
AssociationMeetings,University
foranyremaining
errorsis ours.
theWorldBank forusefulcomments.Responsibility
International
63, Summer2009, pp. 491-532
Organization
© 2009 byThe IO Foundation.
doi:10.1017/S0020818309090171
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All use subject to JSTOR Terms and Conditions
492 International
Organization
behavioris evaluated.Thereare at leasttworeasonsforthis.First,it
government
is well establishedin theoryand in empiricalworkthattradepolicy,like many
to favor
and is used by governments
othergovernment
policies,is redistributive
in this
literature
certainconstituents
over others.1Second,therecenttheoretical
and
area (followingtheworkof Grossmanand Helpman2)offersa parsimonious
the prithatis suitableforestimating
empiricallyamenablestructural
platform
foraggregate
therelativepreference
of a governments
of interest:
maryparameter
This
of governments.
welfareoverprivaterents,thatis, thewelfare-mindedness
a?
relativeweightis knownin theliterature
(detailedbelow) as theparameter
show
The resultsfromthefirststep,usingdata frommorethanfifty
countries,
in theweightthattheirgovernments
substantial
varianceacrosscountries
place on
Forinstance,
socialwelfareversustheirprivateinterests
(thea parameter).
aggregate
theestimatesforcountriessuchas Nepal,Bangladesh,Ethiopia,and Malawi are
lowerthanforHong Kong,Singapore,Japan,and theUnitedStates.
many-fold
in the Grossman-Helpman
a is takento be primitive
Althoughtheparameter
factors
model,thewide variationin a acrosscountrieshintsat morefundamental
a. We therefore
viewtheresultsfromthefirststepas comingfroma
underpinning
modelwherethedeterminants
ofa area "blackbox."In thesecondstepwe unpack
thebox. Doing so requiresa continuity
betweenthemodelthatproducedthefirstdetailsaboutwhatmightdetermine
stepestimatesof a, and themodelsadmitting
as
thesea's. We specifically
considermodelsin whichtradepolicyis determined
theoutcomeofelectoralcompetition
andlegislativebargaining.
Theysuitourpuraboutassociationsbetween
pose well,andwe use themto advancenewhypotheses
and economicvariableson the one hand,and thepreferpolitical,institutional,
ences of policymakers
on theother.Differences
in theelectoralsetupsor legislativedecisionprocessmakesome governments
moreinclinedto maximizesocial
welfarewhenmakingtradepolicydecisionsand othergovernments
less inclined
to do so. This theory-based
our studyfromother
empiricalanalysisdistinguishes
studies about the associationsbetweeninstitutions
and policy
cross-country
outcomes.
we reporta numberof new findings.
The greatertheproportion
Empirically,
of thepopulationthatis informed,
the largeris government's
concernforwelfare.The less ideologicallybeholdenthe publicis to the partiesin the legislais theirgovernment.
The moreproductiveis
ture,themorewelfare-maximizing
media advertising,
the greateris the demandby politiciansforspecial interest
voterswhilecontesting
elections),and the
money(in orderto sway uninformed
1. Schattschneider
1935; and Baldwin 1985 have spawnedan enormouspoliticaleconomyliterature.Theyare substantiated
usingvotingdatain Hiscox2002; Boharaet al. 2005; BaldwinandMagee
2000; and McGillivray1997.
2. Grossmanand Helpman1994.
3. Empiricalworkhere,largelyfocusedon U.S. data,includeGoldbergand Maggi 1999; Gawande
and Bandyopadhyay
2000; McCalman2004; Mitra,Thomakos,and Ulubasoglu2002; and Eicherand
Osang 2002. Gawandeand Krishna2003 surveythisfield.
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WhatGovernments
Maximizeand Why 493
concernforwelfare.Executivechecksand balanceson
loweris thegovernment's
increasetheweighton welfare,whileelectoralcomthepowersof thelegislature
petitionforthe executivelowersit since candidatesforthe executiverelyon
voters.
moneyto swayuninformed
special interest
The restof thepaperis organizedas follows.In thefirstsection,we derivethe
that
Grossman-Helpman
predictionof endogenoustradepolicy determination
of governments.
data
of thewelfare-mindedness
enablesestimation
Industry-level
exercises.These data and the
countriesare used in theestimation
fromfifty-four
estimatesare describedin thesecondsection.The thirdsectionderives
resulting
and legislativebargaining
modelsof trade
fromelectoralcompetition
hypotheses
abouttherelationship
betweenspecific
A numberof hypotheses
policyformation.
ofgovernments
arestated.These
variablesandthewelfare-mindedness
institutional
hypothesesare thentakento the data in the fourthsection.The variablesare
describedand theresultsare empirically
analyzed.The finalsectionconcludes.
What GovernmentsMaximize: Theory
This sectionpresentstheGrossman-Helpman
(henceforth
GH94) model.It proconcern
basis forourestimatesof theextentof government
videsthetheoretical
because
inthissectionis formal,
toprivategain.Thepresentation
forwelfarerelative
linkedto theory.
Readersless
we wishto emphasizethatourempiricsare tightly
after
in thetechnicalderivation
interested
mayskipto thesecondsectiondirectly
underto intuitively
however,
equation(1). It willbe beneficial,
readingup through
standequation(5) sinceit providesthelinkbetweenthefirstand secondstepsin
thisarticle.The GH94 modelis a simplegeneralequilibrium
politicaleconomy
of a smallopen economythatvalues
modelthatfeaturesa (unitary)government
bothitspopulation'swelfareas well as moneycontributions
byimport-competing
Sincetradepolicymaybe usedbygovwhogainfromincreasedprofits.
producers
to increasedomesticpricesoverworldprices,import-competing
ernment
producinordertodistort
intolobbiesandpaythegovernment
ersorganizepolitically
prices
maxtariffs
aretheresultofgovernments
The equilibrium
on imports.
usingtariffs
thisis based on the
Intuitively,
imizingtheirobjectiveandlobbiesdoingsimilarly.
followingcalculus.
notonlyin lobbyingmoneybut
is interested
thatthegovernment
We mentioned
is also concernedaboutthecollectivewelfareof its public.Suppose it weighsa
dollarof itspublic'swelfareand a dollarof lobbyingcontributions
equally.Then
willrequirelobbiesto payup to theextentofthewelfareloss that
thegovernment
relaon thepublic.4If government's
thelobbies,inflicts
whichbenefits
thetariff,
for
tiveweighton publicwelfareis tentimeslargerthanon moneycontributions,
in the
4. This is exact in thesimplerversionof theGH94 modelwe use below,butapproximate
moredetailedGH94 model.
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494 International
Organization
example,thenit will requirelobbiesto pay tentimesas muchas thewelfareloss
fromthepricedistortions.
Ifthegovernment
is willingto sell outitspubliccheaply
fromlobbiesthantheamountof thewelthenit will requireless in contributions
fareloss.
on theelasticityof
The extentof thewelfareloss, in turn,dependsimportantly
importdemand.Lobbies,on theotherhand,calculatetheiroptimalmoneycontributionson thebasis of therentstheyexpectto receivefromthetariffs.
These,in
ratio.Thus, the tariffsset in
turn,depend(positively)on the output-to-import
political-economic
equilibrium
dependon importdemandelasticitiesand outputratiosin each sector.The mainadvantageof theGH94 modelis thatit
to-import
betweentariffs
and thesemeasurablevariables
providesan explicitrelationship
thatmaybe used to estimatetherelativeweightthata government
places on welThis relationship
fareversuscontributions.
appearsin equation(8).
Our
The purposeof therestof thissectionis to deriveequation(8) formally.
notationhereborrowsfromGH94 and Goldbergand Maggi.5Considera small
in thiseconomyareassumed
openeconomywithn + 1 tradablesectors.Individuals
to have identicalpreferences
overconsumption
of thesegoodsrepresented
by the
utilityfunction:
n
£/= co+2>,(c,.),
(l)
wheregood 0 is thenumeraire
good whosepriceis normalizedto one. The additiveseparability
oftheutility
functions
eliminates
cross-effects
amonggoods.Consumersurplusfromtheconsumption
of good i, sh as a function
of itsprice,ph is
for
givenby s,-(/?,-)- u(d(pi)) - Pid(pj), whered(pi) is thedemandfunction
good /. The indirectutilityfunctionforindividualk is given by vk = yk +
2"=i sf(pj), whereykis theincomeof individualk.
On theproduction
side,thenumeraire
good is producedusinglaboronlyunder
constantreturns
to scale,whichfixesthewage at one. The othern goods are produced withconstantreturnsto scale technology,
each usinglabor and a sectorspecificinput.The specificinputis in limitedsupplyand earnsrents.The priceof
thereturns
to thespecificfactor/,denotedir(/?,).The supply
good i determines
= tt'(p/). Since rentsto ownersof a specific
function
of good i is givenbyy,(/?/)
inputincreasewiththepriceof thegood thatuses thespecificinput,ownersof
thatspecificinputhave a motiveforinfluencing
government
policyin a manner
thatraisesthegood's price.
Government
uses tradepolicy,specificallytariffs,
thatprotectproducersof
import-competing
goods and raise theirdomesticprice.The worldpriceof each
chooses a specific(per unit)
good is takenas given.For good / thegovernment
5. Goldbergand Maggi 1999.
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WhatGovernments
Maximizeand Why 495
t-, to drivea wedgebetweentheworldprice,p?, and thedomestic
importtariff,
revenueis distributed
equallyacrossthepopulaprice,pi, pi = pf + V-.The tariff
tionin a lump-summanner.
acrossall individuals
welfareW.Aggreindirect
utility
yieldsaggregate
Summing
to specificfactors,
gateincomeis thesumof laborincome(denoted/),thereturns
of domesticprices)
revenue.Therefore
and tariff
aggregatewelfare(as a function
is givenby:
+ 2 Si(Pi\
w = i + 2 77^) + 2 t;Mt(Pi)
1=1
1=1
I'=l
(2)
whereimportsMt = dt- yt.
of thepopulationof a country
thatis repreWe also assumethattheproportion
This allowsus to ignoretheincentives
sentedby organizedlobbiesis negligible.6
on goodsthatareconsumed,butnotproducedbyowners
to lobbyforlowertariffs
on goods
of specificfactors,as well as theincentivesto lobbyforhighertariffs
revenue.While
thatare neitherconsumednorproduced,but thatgeneratetariff
solid
is imposedon thetheoretical
thisassumption
model,itis based on relatively
relative
to
are
uncommon
lobbies
as
consumer
(and taxation)
empiricalgrounds,
the
rents
to
care
about
in
our
lobbies
In
other
lobbies.
words,
only
setup,
producer
thewelfareof lobby/is simplygivenby:
theirspecificfactor.More formally,
W, = 77((A).
(3)
betweensocialwelreflects
thetrade-off
ofthegovernment
The objectivefunction
These contributions
fareand lobbyists'politicalcontributions.
may be used for
or
a
re-election
or
to
finance
varietyof otherselfcampaigns,
personalgain,
withits constituents.
favor
the
that
interested
government
expenditures maybuy
of campaigncontrisum
a
function
is
the
Thus, government's
weighted
objective
W:
of
its
the
welfare
and
constituents,
butions,C,
G = aW+ C = aW+ 2 Q>
i(EL
(4)
a is theweightgovernment
wheretheparameter
putson a dollarof welfarerelativeto a dollarof lobbyingcontributions.
C, to the
Lobby i makescontribution
maximizesan objectivefunction
and therefore
givenby Wt Ct.
government
Nash
We presumethatthe equilibriumtariffsarise froma
bargaininggame
and lobbies.Goldbergand Maggi showthatthisleads to
betweenthegovernment
in all
6. This is equivalentto assumingthatownershipof specificfactorsis highlyconcentrated
sectors.
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496 International
Organization
thesamesolutionas doestheuse ofthemenuauctionmodelemployedin Grossman
and Helpman.The Nash bargainingsolutionmaximizesthejoint surplusof the
and lobbiesgivenbythesumof thegovernment's
welfare,G, andthe
government
The jointsurplusbecomes
welfareof each lobbynetof itscontributions.
n = aW+^Wi9
(5)
i
This is
Notethat(5) implicitly
assumesthatall sectorsare politicallyorganized.7
wherepoliticalaction
trueof manufacturing
sectorsin mostadvancedcountries,
committees
associations(Europe)lobbytheirgovern(UnitedStates)or industry
as well.Other
in developingcountries
ments.Suchindustry
coalitionsareprevalent
thanin theUnitedStates,rulesand regulations
lobbyingactivityto be
requiring
as proofof the
reportedare blatantlyabsent.We takethislack of transparency
of lobbyingactivity.Since our analysisis conductedat theaggrepervasiveness
Classification
International
StandardIndustrial
(ISIC)
gationleveloftwenty-eight
are organizedis an
level industries,
theassumptionthatall industries
three-digit
reasonableone.8
empirically
Underthetwo assumptions
thatall sectorsare organizedand a negligibleproportionofthepopulationis organizedintolobbies,thejointsurplustakesthesimple form:
a = /+ 2 [a + iK- + 2 "itiMi+ st).
/= 1
1=
1
(6)
The firstorderconditionsare:
[a + l]X, + a[-dt + tfM!(Pi) +MJ = 0, i = l,...,n.
(7)
on each good thatmaximizesthejointsurplus:
Solving,we getthetariff
- -
= -
(-^-1
, i = l,. ..,n.
(8)
In equation(8) tt= (pt - pf)/pfis thead valoremtariff
forgood /,wherept is the
domesticpriceforgood i at homeandpf is its worldprice.X//M,is theequilibriumratioof outputto importsand et = -Ml-pjMi is theabsoluteelasticityof
7. Thatis, all sectorsare able to solve collectiveactionproblemsin organizing
forlobbying.For a
modelthatendogenizeslobbyingorganization
see Mitra1999.
8. In theU.S. data,forinstance,significant
contributions
to thepoliticalprocessare reported
by all
industries.
three-digit
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WhatGovernments
Maximizeand Why 497
(tt> 0).
importdemand.Thus,producersof good /are able to "buy"protection
Importsdetermine
Industry
output,Xh capturesthesize of rentsfromprotection.
so the smallerare the importsthe
theextentof welfarelosses fromprotection,
The wellknownruleabouttaxationaccordinginverse-elasticity
higheris thetariff.
is in evidencehere:theloweris theabsoluteelasticity,
eh thegreateris theprice
rulein theeconomics
and conversely.Knownas theRamsey-pricing
distortion,
it is theleastinefficient
literature,
wayto distortprices,sinceit createsthesmallest welfareloss.
What GovernmentsMaximize:
ComparativeEstimatesofa
thetrade-off
a. Rewrite
parameter
Equation(8) suggestsa simplewayofestimating
as
(8)
h
Mt
TTT'^-
1
' =1
"■
(9)
a. The data,
We use a stochasticversionofthisequationto estimatetheparameter
countries.
and timeforeach of fifty-four
describedbelow,are across industries
modelwe use to estimatethea's is
Indexingthetimeseriesby t,theeconometric
-^.^3=00
1 + tit
Ait
+ 6,, i = l,...,n,
(10)
across
wheretheerrortermeitis identicallyindependently
normallydistributed
variancea2. The variwithhomoscedastic
foranyspecificcountry,
observations
ance is allowed to varyacross countries.The coefficient
(30 = \/a.Takingthe
the
side (lhs) of the
to
left-hand
and
the
ratio
importelasticity
output-to-import
of
to
tariffs
issues
mutes
output,imports,and
concerningendogeneity
equation
theelasticityof importdemand.
fora setoffifty-four
Model 10 is estimated
high,middle,andlow-incomecounacrosstwenty-eight
data (incompletely)
tries.9For thesecountrieswe have tariff
the
1988-2000
over
industries
ISIC
period.10
three-digit
9. TheyareArgentina,
Indonesia,India,
Bolivia,Brazil,Chile,China,Colombia,Ecuador,Hungary,
Poland,Thailand,TrinidadandTobago,
Korea,SriLanka,Mexico,Malawi,Malaysia,Peru,Philippines,
CostaRica,Morocco,Nepal,
Cameroon,
Venezuela,SouthAfrica,Bangladesh,
Taiwan,Uruguay,
Turkey,
Egypt,Ethiopia,Guatemala,Kenya,Latvia, Pakistan,Romania,Austria,Denmark,Spain, Finland,
Greece,Ireland,Italy,Japan,Netherlands,
Norway,Sweden,United
France,UnitedKingdom,Germany,
States,Hong Kong,and Singapore.
nationratestromtheUnitedNationsconierenceon iraae ana
10. Tariirsare appliedmost-iavored
Development(UNCTAD) TRAINS databaseat thesix-digitHS, whichweremappedintothethree-
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498 International
Organization
level outputand tradedata are fromtheWorldBank'sTradeand ProIndustry
1
ductiondatabaseconstructed
byNicitaandOlarreaga.1We use theimportdemand
elasticitiesestimatedforeach countryat the six-digitHarmonizedSystem(HS)
level by Kee, Nicita,and Olarreaga.12
Since thestandarderrorsof theelasticity
errorand
estimatesare known,theyare treatedas variableswithmeasurement
The importdemandelasticitiesare missing
adjustedusinga Fuller-correction.13
- Ecuador,Nepal, Pakistan,and Taiwan.For themwe use the
forfourcountries
industry
averagesof theelasticityestimatestakenacrossall othercountries.
Estimatesof thecoefficient
/30in equation(10), denotedI/a, and its standard
errorare displayedin Table 1 forthefifty-four
thesecoefficountries.Inverting
cientsyieldestimates
oftheparameter
a. Theyappearin thelastcolumnofTable 1.
Severalinteresting
andsurprising
features
oftheseestimates
areevidentinTable2,
wherecountriesare sortedby theira estimates.In general,richercountrieshave
of richercountries
Thatis, governments
highervaluesof a thanpoorercountries.
are revealedby theirtradedata to place a muchgreaterweighton a dollarof
welfarerelativeto a dollarof privategain (contributions).
The last two columns
indicatethatcountrieswitha > 10 have percapitaincomesat thelevel of OrganizationforEconomicCooperationand Development(OECD) countries(withthe
havefairlyhighvalues
exceptionof BrazilandTurkey).Middleincomecountries
of a. All SouthAmericaneconomiesin oursample,withtheexceptionof Bolivia
(0.68), fall withinthisgroup.Othernotableliberalizerscome fromAsia: India
(2.72), Indonesia(2.62), Malaysia(3.13), Philippines
(2.84). The lowesta's belong
to thepoorAsiannationsof Nepal (0.06), Bangladesh(0.16), Pakistan(0.74), and
Sri Lanka (0.93), and theAfricannationsof Ethiopia(0.17), Malawi (0.25), Cameroon(0.30), and Kenya(0.84).
An important
featureof our resultsis that,in contrastwithpreviousexaminationsof theGrossman-Helpman
model,14ourestimatesof a are reasonable,both
qualitatively
(poorercountrieshave smallera's thanrichercountries)and quantilow-tariff
or zero-tariff
countrieslike Hong Kong and
tatively(only extremely
foundforTurkey,
Singaporehave <z'sgreaterthan50, while thiswas routinely
andtheUnitedStatesin thestudiesreferenced
Australia,
above).We findthecrossand intuitively
countryvariationin a to be striking
pleasing.Countrieswithlow
a's accordwiththewidelyacceptedview thatgovernments
in thosecountriesare
also amongthemostcorruptin theworld.IndeedtheSpearmanrankcorrelation
level.Wheremissing,tariffs
are augmented
digitISIC industry
(WTO)
by WorldTradeOrganization
fromtheWTO's IDB and WTO's TradePolicyReviews.Theyare closely
appliedrates,constructed
correlated.
11. Nicitaand Olarreaga2007.
12. Kee, Nicita,and Olarreaga2008.
13. Fuller1986; see also Gawandeand Bandyopadhyay
2000. This correction
limitstheinfluence
of outlyingestimateswithlarge standarderrors,whichwould otherwisegrosslyoverstatethe true
elasticity.
14. Goldbergand Maggi 1999; Gawandeand Bandyopadhyay
2000; Mitra,Thomakos,and Ulubasoglu2002; McCalman2004; and Eicherand Osang 2002.
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WhatGovernments
Maximizeand Why 499
International
betweentheTransparency
Corruption
PerceptionIndexfortheyear
2005 and our measureof government
willingnessto tradeoffsocial welfarefor
thatthetwo
rejecttheassumption
politicalrentsis 0.67, and we can statistically
In 2005 theTransparency
International
seriesareuncorrelated.
Corruption
Perceptionindexrankof thetwo countriesat thebottomof oura rankings(Nepal and
the
respectively.
Similarly,
Bangladesh)were 121 and 156 out of 157 countries,
indexrankof thetwo countriesat thetop
International
Corruption
Transparency
of oura rankings(SingaporeandTaiwan)were5 and 15, respectively.
TABLE l. Estimates of a
Country
ccode
I/a
se(l/a)
a
Country
ccode
I/a
se(l/a)
a
Argentina
Austria
Bangladesh
Bolivia
Brazil
Chile
China
Cameroon
Colombia
Costa Rica
Germany
Denmark
Ecuador
Egypt
Spain
Ethiopia
Finland
France
U.K.
Greece
Guatemala
Hong Kong
Hungary
Indonesia
India
Ireland
Italy
Japan
ARG
AUS
BGD
BOL
BRA
CHL
CHN
CMR
COL
CRI
DEU
DNK
ECU
EGY
ESP
ETH
FIN
FRA
GBR
GRC
GTM
HKG
HUN
IDN
IND
IRL
ITA
JPN
0.19
0.11
6.34
1.47
0.04
0.21
0.12
3.31
0.13
0.50
0.09
0.12
0.81
0.80
0.07
5.92
0.09
0.09
0.08
0.20
0.65
0.00
0.25
0.38
0.37
0.29
0.07
0.03
0.02
0.01
2.27
0.20
0.00
0.02
0.01
2.54
0.01
0.07
0.01
0.01
0.14
0.18
0.00
2.26
0.01
0.01
0.01
0.02
0.08
0.00
0.02
0.09
0.05
0.04
0.01
0.00
5.25
8.79
0.16
0.68
24.91
4.83
8.33
0.30
7.88
1.98
11.55
8.10
1.23
1.24
15.16
0.17
10.57
10.96
11.86
5.11
1.53
oo
3.96
2.62
2.72
3.50
13.42
37.81
Kenya
Korea
Sri Lanka
Latvia
Morocco
Mexico
Malawi
Malaysia
Netherlands
Norway
Nepal
Pakistan
Peru
Phillipines
Poland
Romania
Singapore
Sweden
Thailand
Trinidadand
Tobago
Turkey
Taiwan
Uruguay
UnitedStates
Venezuela
SouthAfrica
KEN
KOR
LKA
LVA
MAR
MEX
MWI
MYS
NLD
NOR
NPL
PAK
PER
PHL
POL
ROM
SGP
SWE
THA
TTO
1.16
0.06
1.08
0.17
0.87
0.77
3.93
0.32
0.35
0.24
15.56
1.35
0.21
0.35
0.13
0.11
0.00
0.08
0.94
0.90
0.33
0.00
0.18
0.01
0.14
0.07
1.17
0.02
0.05
0.05
5.66
0.31
0.03
0.03
0.01
0.01
0.00
0.03
0.17
0.16
0.86
16.15
0.93
5.75
1.14
1.29
0.25
3.13
2.85
4.22
0.06
0.74
4.85
2.84
7.48
9.25
404.29
12.28
1.06
1.11
TUR
TWN
URY
USA
VEN
ZAF
0.07
0.12
0.28
0.04
0.18
0.19
0.00
0.01
0.02
0.01
0.01
0.02
14.53
8.53
3.62
26.14
5.41
5.13
observations
In therunswithfifty-four
Notes: Hong Kong has zero tariffs.
(fullsample)Hong Kong's a is set to
10,000.
are (1) thelow a forMexico,despiteits
Some resultswe findto be surprising
in theNorthAmericanFreeTradeAgreement
(NAFTA), (2) thelower
membership
thanexpecteda fortheOECD countriesof Norway,Ireland,and theNetherlands
higha's forthesocialistcountriesin
(in the3 < a < 5 group),(3) therelatively
andRomania,(4) therelatively
higha's for
transition,
includingPoland,Hungary,
Japanand China,bothof whomhave been criticizedforbeingmercantilistic
and export-oriented.
protectionist
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WhatGovernments
Maximizeand Why 501
These unexpectedresultsemphasizethe factthatthe theoreticalmodel does
notbase its prediction
butalso on the
simplyon openness(low or hightariffs),
ratio,and importdemandelasticities,as well as theircovariimport-penetration
and each other.The incidenceof tariffs
in industries
withhigh
ance withtariffs,
to
importdemandelasticitiesrevealsthewillingnesson thepartof governments
easilytradepublicwelfareforprivategain,15sincein welfare-oriented
(relatively)
countriesthemostprice-sensitive
goods shouldbe distortedthe least.The inciwithhighimport-to-output
ratiosalso revealsthewillin industries
denceoftariffs
to tradepublicwelfareforprivategain
ingnesson thepartof thosegovernments
sectorscreateslargedeadweight
losses.Empirsincedistorting
pricesinhigh-import
estimatesdiscussedabove,but
ically,thisis notonlyrevealedby the surprising
low correlation
betweenourestimatesof a, and averagetaralso bytherelatively
withthe
iffs,whichis estimatedat 0.33, and comparesbadlywiththecorrelation
theneedto consider
indexofperceivedcorruption.
Thus,theestimatesunderscore
aboutthe
morethansimplisticmeasuresof opennessin orderto makeinferences
tradepublicwelfareforprivategain. The
termsat whichdifferent
governments
moreappropriate,
butalso
measureis notonlytheoretically
Grossman-Helpman
appearsto be quitedistinctfromsimplermeasures.
empirically
behave
in thedeeperquestionof whygovernments
interested
We areultimately
as theydo. Whatexplainsthe variationin the estimatesof a across countries?
Whydo some countrieshave low a's and othershigha's? Are politiesin poorer
contentto lettheirgovernments
countries
cheaplytradetheirwelfareaway?If so,
do we observetheopposite?Thesearethequeswhy?Andwhyin richercountries
of thearticle.
tionsto whichwe devotetheremainder
Explainingthe Variationin a: Theory
of
foundations
we delveintoinstitutional
To explainwhya variesacrosscountries
is
data-driven
One
a
of
two
routes.
we
take
one
In
can
approach
policymaking. this,
details
thatinvolveschoosinga setofvariablesthatadequatelydescribeinstitutional
anduse themtoeconometrically
ofthepolicyprocessindifferent
countries,
explain
variationin a. Such a methodwouldshedlighton thoseinstituthecross-country
to behaveas theydo in settingtradepolicy.The
tionsthatmotivategovernments
ofhowinstitutions
secondis to seekstructural
mightexplainthevariexplanations
We optforthelatterin thisarticle,sinceitcontinuesin
ationin a acrosscountries.
of theGH94 modelthatdeliveredourestimatesfora}6
thetradition
detailsof
Positivetheoriesthatmodelpolicyoutcomesbased on institutional
models
Electoralcompetition
thepolicyprocessfallintothreebroadcategories.17
15. This resultsin a highestimateof/30and low estimatesof a.
in this
16. A data-driven
manyof thefindings
approachyieldsresultsthatreinforce
factor-analytic
readers.
article.Theyare availableto interested
17. Helpmanand Persson2001.
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502 International
Organization
focuson theprocessby whichpartiesare represented
and feain thelegislature,
turedetailsaboutthestructure
ofvotercharacteristics
versusuninformed)
(informed
and voterpreferences.
Lobbyingmodelsfocuson lobbyingprocessand feature
detailsaboutthe lobbyinggame. Legislativebargainingmodelsfeaturespecific
legislativedecisionmakingprocessesthatmayemphasize,forexample,agendacommit(forexample,ministers,
settingand theallocationof policyjurisdictions
tee chairs).In thefirstpartof thispaper,we used theGH94 lobbyingmodelto
But
estimatetheweightputon social welfarefromtradepoliciesof governments.
thedeterminants
of theseweightswerea "blackbox." The objectiveof thisseclens of
tionis to unravelthe determinants
of a as viewedfromthe theoretical
electoralcompetition
and legislativebargaining
models.
ElectoralCompetition
and Lobbying
has been done in threeimportant
Integrating
lobbyingand electoralcompetition
models,respectively,
Baron,andGrossmanandHelpman.18
They
byAusten-Smith,
modelpoliciesas outcomesfromtheinteraction
oftwopartiesand specialinterest
in themotivesofthe
to them.Theydiffer
groupsthatmakelobbyingcontributions
in altering
electoraloutcomesinAustenlobbyists.
Lobbyistsarepurelyinterested
Smithand Baron.In Grossmanand Helpman,lobbyistsare also able to influence
via lobbying.We will abstractfrom
policyoutcomesby alteringpartyplatforms
theelectoralmotiveand focuson thisinfluenceseekingmotivein orderto connectthe a parameterwithmoreprimitiveinstitutional
details.To thisend, we
describethe 1996 Grossman-Helpman
(henceforth
GH96) model.
Two parties,A andB, contestan electionforseatsin thelegislature.
Each party
advancesa slate of candidates,and the countryvotes as a singleconstituency.
Once electionsare over,and thevotescounted,bothpartiesoccupyseatsin legislaturein proportion
to thepopularvotecount(moreon thedistinction
between
thisproportional
systemand a pluralitarian
systembelow).
Thereare two classes of voters,informed
and uninformed.
The formerhave
immovablepreferences
basedon (1) thepolicypositionofeach partyand (2) other
characteristics
oftheparty(liberal,conservative).
Uninformed
voters,on theother
hand,maybe inducedto movefromtheircurrent
positionvia campaignexpenditureson slogans,advertising,
and otherinformational
devicesdesignedto impress
them.The difference
in campaignspendingby the two partiescruciallydetermineshow manyuninformed
voterstheywill be able to moveto theirside. For
thisreason,politicians
eachpartydemandcontributions.
Lobbiesform
representing
to supplycontributions.
On thelobbyingside we considerthecase, as in theGH94 model,whereeach
sectoris represented
of theorganizedpopulaby a singlelobby,butthefraction
tionrepresents
a negligibleproportion
of thetotalpopulation.Each lobbyis inter18. See Austen-Smith
1987; Baron 1994; and Grossmanand Helpman1996.
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WhatGovernments
Maximizeand Why 503
its own sector,and thereis no competition
or conflict
ested only in protecting
frommultiplelobbies,
amonglobbies.19Each partythusreceivescontributions
witheach lobby'sinterest
beinga singleelementof thevectorp. The gamecomschedprisesof twostages.In thefirststage,lobbiesannouncetheircontribution
of thetariff
to theirsector),one to each of thetwo
afforded
ules (as a function
parties(partyA and partyB). In the second stage,thetwo partieschoose their
in orderto maximizetherepresentation
of
vectoroftariffs
(theirpolicyplatforms)
The lobbiesthenpay theirpromisedcontributions,
theirpartyin thelegislature.
thepartieswage theircampaigns,and thelegislature
/congressthatassumesoffice
vector(legislativeprocessesare a blackbox
one of theparty'stariff
implements
models- we unpackthisbox below).
in electoralcompetition
fora is foundin thestructural
A politicalmicrofoundation
analogoftheexpresforeach
sionforthejointsurplusin equation(5), whichmaybe written
separately
lobbyi as:
ni = Wi(ti)+ aW(ti),i = l,...,n.
(11)
in each sector
In theGH94 unitary
case, thepoliticallyoptimaltariffs
government
in a waythatmaximizestheweightedsumoftheaggrei is setbythegovernment
gate welfareof lobby/ and theaggregatewelfareof thecountry'scitizens.The
is inducedby lobbyi to weightthelobby'sinterest
by (1 + a), which
government
We will
is greaterthantheweightof a itplaces on thepublic'saggregateinterest.
observea parallelbetweenequation(11) andthejointsurplusin theelectoralcomof a fromtheparampetitiongame,and we use it to pin downthedeterminants
etersof theelectoralcompetition
game.
Grossmanand Helpman(1996, p. 274 eq. (4)) show thatthejoint surplusin
theelectoralcompetition
game involvingpartiesA and B and one (say,sectori)
is
lobby
+ ^-^(w(ti),
nf = <f>KWi(ti)
a h
K = A,B.
(12)
welfareof lobby/. In
As in equation(11), Wt(ti)is the (net of contributions)
voters.Thereare four
equation(12), W(ti) is theaggregatewelfareof informed
If a = 0,
of voterswho are uninformed.
to consider,a is thefraction
parameters
thenW(ti) becomesthewelfareof theaveragevoter,just as in equation(11). We
votersmakes special
will see below thatbuyingthe supportof uninformed
the magnito politicalcandidates,and a determines
interests
groupsimportant
thedivercontributions.
of specialinterest
tudeoftheimportance
/ > 0 quantifies
are exclusivelyenjoyed
Baron'sidea of "particularistic
19. This exemplifies
policy"whosebenefits
by thosewho lobbyforit,butthecostsare notonerouson others;see Baron 1994.
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504 International
Organization
sityof views about the two partiesamongvotersin termsof all fundamental
characteristics
(forexample,liberal-conservative)
excepttheirpolicypositionsabout
thetariff
of views;thelarger
tt.The closeris /to zero thegreateris thediversity
is / the closer are the two partiesperceivedto be. This parameteris relevant
because themoreimportant
thesedivergencesamongthepartiesare to voters
the morecommitted
theyare to a particularpartyforideologicalreasons,for
example- theless likelytheyare to be swayedby tradepolicy,h > 0 quantifies
voter.
the abilityof campaignspendingto move the positionof an uninformed
The greateris h, themoreproductive
is a dollarof campaignspendingin influwithwhich
voter.Sincemoneybecomesa usefulinstrument
encingtheuninformed
- specialinterest
to swaytheuninformed
voter,thesourcesofthismoney
groups
becomeusefulto thepoliticalcandidates.Finally,</>K
is theprobability
that,once
electionsare over,thelegislatureactuallyadoptspartyK's tradepolicyplatform
(sector/ tariff
promisedby partyK beforethe election).Withtwo parties,<j)A
+ (f>B= 1. We will see below therelevanceof thiskeyparameter
in formulating
testablehypotheses.
The parallelwithequation(11) is clear.Equation(12) showsthateach partyis
inducedby lobby i to maximizea weightedsum of the aggregateinterestof
informed
votersandtheaggregate
interest
ofmembers
oforganizedinterest
groups.
The aggregateinterest
of informed
voters(interest
groups)receivesa weightthat
increases(decreases)withtheshareof informed
votersin thepopulation(1 - a),
decreases(increases)withthediversity
of theirviewsabouttheparties'ideological positions,and decreases(increases)withhow easily uninformed
votersare
to make
swayedby campaignspending.We will use theseand otherobservations
testablepredictions.
empirically
Predictions
Proportionalvs. PluralitarianSystems
In a proportional
systemseats in thelegislatureare allocatedto thetwo parties
of the popularvote.Withjust two parties,and the
accordingto the proportion
theobjectiveof maximizing
thenumber
countryvotingas a singleconstituency,
of seatsin legislatureis equivalentto maximizing
Thatis, theoutcome
plurality.
is exactlythesameas ifthesystemofrepresentation
weremajoritarian.
The GH96
modelis sucha two-party
model.The real worldis different
in
one-constituency
twoimportant
respects.
butas severalgeoFirst,a country
typicallyvotesnotas a singleconstituency,
distinctconstituencies.
In a typicalmajoritarian
graphically
systemeach district
electsa singlerepresentative
to thelegislature.In a typicalproportional
system
each districtis represented
by multiplecandidatesso thata district'sseats are
dividedbetweenthetwopartiesin proportion
to thepopularvote.If districts
are
heterogeneous,
say,withrespectto thecompositionof specificfactors,thenit is
morethana proporpossiblefora majoritarian
systemto favorspecial interests
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WhatGovernments
Maximizeand Why 505
in GrossmanandHelpman.20
Thisis demonstrated
tionalsystem.
They
theoretically
modelin whichthedistricts
arehetthree-district
advancea two-party
three-good,
erogeneousin the compositionof (three)specificfactors.Thereare no lobbies,
of theiraverageconstitutheinterests
however,each legislatorseeksto represent
in the
ent. Grossmanand Helpmanshow thatif bothpartiesseek a majority21
then,becausetheelectionof legislatorsis tiedto particular
geographic
legislature
thaniflegislators'interests
were
thereis greaterprotection
or economicinterests,
morecloselytiedto thenational,notregional,interests.
three-district
Considerthetwo-party
exampleundera systemof proportional
in whichcandidatesfrombothpartiescompeteformultipleseats
representation
Evans22showsthatit is morelikelyin thecase of prowithinthesame district.
thatone partysweepstheelection,thatis, winsa majorportionalrepresentation
thanundera majoritarian
system(in whichthesingleseat
ityin all threedistricts,
by majorityvote in each district).If one partysweeps
perdistrictis determined
thatis,
theelection,thepolicyit choosesreflects
national,notregional,interests,
leads to greaterprotecfreetrade.23
Thus,a majoritarian
systemof representation
one.24
tionthanproportional
Thisresultdoes notrequirethepresenceoflobbiesbecausethemodelis devoid
whatdoes thisresultimplyabout
voters.If lobbieswereadmitted,
of uninformed
We surof a acrossthetwo systemsof politicalrepresentation?
thedistribution
misethatsincea majoritarian
(ithas a
systemis predisposedto beingprotectionist
ofsweepingthestatesthana proportional
lowerprobability
one),lobbieswillensure
are weighedmoreheavilyin equation(12) in majoritarian
theirinterests
systems
a's are lowerin proportional
ones. Thatis, all else constant,
thanin proportional
of thisrequiresextending
thanin majoritarian
systems.A formaldemonstration
voters(whose
modelwithuninformed
electoralcompetition
theGH96 single-district
We stateour first
presencemotivatesthe existenceof lobbies) to n districts.25
as:
hypothesis
morethandoes a proportional
HI: A majoritarian
favorsspecial interests
system
withlow a!s.
associated
are
Majoritariansystems therefore
system.
of
It is possiblethatthethree-district
exampleexaggeratesthepredisposition
as
the
so
that
than
to
be
less
ones,
majoritarian
protectionist
systems
proportional
20. Grossmanand Helpman2005.
thenumberof seatsas in GH96.
frommaximizing
21. Ibid.This objectiveis different
22. Evans 2008.
23. Grossmanand Helpman2005, eq. 4.
24. Rogowskis 1987,208, prescientlogic arguedthatsinceproportional
systemsmakestatesmore
thanmajoritarian
fromrent-seekers
systems,the formerlead to morestableand longindependent
to freetradethanthelatter.The reasonforthisis thatproportionate
livedpoliticalcommitments
systemsresultin stronger
systems.
(and fewer)partiesthanmajoritarian
research.
25. This exerciseis outsidethescope of thispaperand lettopen torruture
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506 International
Organization
becomes
of sweepingthedistricts
numberof districtsincreases,theprobability
betweenthetwo systemsdisappears.A rejection
moreremoteand thedistinction
of hypothesis
(1) wouldthenindicatethattheworldis well-approximated
by the
is equivmodelin whichproportional
GH96 two-party
representation
single-district
alentto plurality.
and thereal worldis that
betweentheGH96 construct
The seconddifference
democraciestypicallyhave morethantwoparties.In thedata sectionwe attempt
thatwe
modelwithmultiparty
theoretical
to reconcilethetwo-party
governments
findin thedata.
Voters
Uninformed
a of uninformed
voters.A comparisonof theweightson W
Considerthefraction
a -» 0 as a -» 1.
in equations(11) and (12) indicatesthat,all else heldconstant,
forthisresultis this.In theabsenceof lobbying,
The intuition
partieswill choose
voters.Denote this
theirplatform
to attractthe maximumnumberof informed
an
tariff
as t*. To persuadepartyA to adopta tariff
ti9lobbyi mustcontribute
votesas wouldt*.26The larger
amountthatdeliversat leastas manyuninformed
voter
of uninformed
votersa, themorepivotaltheuninformed
is theproportion
votbecomes.Since theresourcesforlaunchinga campaignto swayuninformed
ers are providedby lobbyi, thelobby'swelfare(hereprofits)
getsgreaterweight
in equation(12). This leads to our secondprediction:
votersin thepopulation,thelower
H2: Thelargeris theproportion
ofuninformed
is a, and conversely.
of a, testingthishypothesisamountsto
Given the cross-country
distribution
of
the
the
uninformed
voterconstructitself.The existenceof
testing validity
votersis centralto theGH96 modelsince it motivatestheexistence
uninformed
of lobbies.It is also centralto a numberof modelsthatfeatureBaron'sidea of the
uninformed
voter.
PartyIdeology
Considerthe ideologicaldivide betweenthe two partiesgivenby parameter
/.
The largeris /, thesmalleris thediversity
of views amongvotersoverthefundamentalcharacteristics
of thetwoparties.A comparisonof theweightson W in
and
(12) indicatesthat,all else held constant,a -> 0 as/ - > 0.
equations(11)
The reasonwhytheweightputon social welfareincreasesas / increasesis this.
Withlittlediversity
of viewsamongvoters,a tariff
thatdeviatesfromthatfavored
26. Grossman
andHelpman
1996(p. 274) showthatthisamount
equals((1 - a)/a)(f/h)[W(t*)
- W(t,)l
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WhatGovernments
Maximizeand Why 507
Whenthereis greatdiversity
by theaveragevoterdoes greatdamageelectorally.
of viewsand thetwopartiesare consideredto be verydissimilar,
thepartiescan
fromt* and still retainthe favorof
affordto set (districti's) tariffsdifferent
voterswho wereinclinedto voteforthemon thebasis of,say,ideology.In conbetweenthetwoparties'basic characteristics,
a poltrast,ifvotersare indifferent
icythatdeviatesfromt*riskslosingmanyvotersto theotherparty.This leads to
our thirdprediction:
in thefundamental
characteristics
H3: Thegreateris theperceiveddifference
of
thetwopartiesin theeyesofvoters,theloweris a, and conversely.
In sum,if votersare clearlypredisposedto one partyor theotheron thebasis
thenbothpartiesare morecheaply
otherthantheirpolicyplatforms,
of attributes
able to imposewelfarecosts on thepublic.The partieswill calculatethatthey
votersthanlose thevotesof theirsupporters.
gainmoreuninformed
Voter
oftheUninformed
Susceptibility
h. A compariof campaignspendingparameter
Finally,considertheproductivity
son of theweightson W in equations(11) and (12) indicatesthat,all else held
uninformed
a - > 0 as h - > oo.Withgreater
constant,
powerofthedollarto influence
both
as
h
from
t*.
to
deviate
less
it
is
increases,
Hence,
voters,
partiesare
costly
of
of lobbyi thanon theinterest
inducedto place greaterweighton theinterest
from
the
electoral
and
last
to
our
fourth
This
leads
theinformed
prediction
public.
model:
competition
H4: The greateris the abilityof a dollar of campaignspendingto influence
voters,theloweris a, and conversely.
uninformed
We now turnto the interactions
amonglegislatorsand the processby which
within
made
are
decisions
legislatures.
LegislativeBargainingand Lobbying
in theareaoflegislativebarmodel27is theprovenworkhorse
The Baron-Ferejohn
withArrow's28
gaining.Modelsoflegislativedecisionmakinghavehadto struggle
accordresultthatitis notpossibleto selectthebestactionfroma setofalternatives
has been
wins).The breakthrough
ingto some votingrule(forexample,majority
of an agenda setterwho is grantedinstitutional
theintroduction
powerto chamofthat
in
the
direction
to guidevoting
andwhoattempts
piona specificalternative
27. Baronand Ferejohn1989.
28. Arrow1963.
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508 International
Organization
thatagendais selectedoverthestatusquo, a voting
agenda.Regardlessofwhether
exists.
equilibrium
We adaptPersson'slegislativebargainingmodel29of publicgoods provision
of a. An
withlobbyingto searchformorehypothesesabout the determinants
modelis thatit allows us to linka
attractive
featureof thelegislativebargaining
with asymmetricpowers of legislators.Specifically,it motivatesthe role of
checks and balances on those powers,withoutwhichtherewould be extreme
redistribution.
i = 1,. . . ,n).
ofa slateoftariffs
To makeourpointsimply,
considerlegislation
{*,-,
is located
concentratedineachofthen districts
Assumethatsectorsareregionally
to thelegislature.
one sector.Everydistrict
sendsone representative
However,there
thewelfare
constraint
on theamountof protection:
is an exogenousinstitutional
amount.This
loss fromtheset of tariffs/subsidies
maynotexceed a prespecified
constraint
thenumberof sectorsthatreceiveprotecmaybe satisfiedby limiting
or both.The existenceof such a
tion,or limitingthe level of tariffs/subsidies,
constraint
is motivatedbelow. Each legislatormaximizesan objectivefunction
inherdistrict
andtherentsobtained
thatis thesumofthewelfareoftheconstituents
fromtariff
Thatis, a legislatorcares speciallyabouttherentsfromthe
policy.30
tariff
of welfare.Thereare two
to hersector,over and above othercomponents
withtheexistenceof lobreasonsforthisassumption.
One is thatit is consistent
bies thatpaythelegislatorsforproducing
theserents.The otheris votes:theelecvotersto
toralcompetition
modelin whichthemoneyis used to get uninformed
voteforthelegislatormaybe embeddedhere.
vectorwhenthereare no lobFirst,considerhow thelegislaturesetsthetariff
bies. The legislativebargaining
game followsa typicalsequenceof events:(1) a
legislatoris chosento be an agendasetter5; (2) she makesa policyproposalfor
adoptingthevector{tf}\(3) thelegislaturevoteson theproposal,and if it gets
thestatusquo outcome,say {t°},
Otherwise,
simplemajority
{tf} is implemented.
is implemented.
The agendasetteris obviouslyinterested
in usingherpowersto
benefit
herdistrict,
butmustobtaina majority
thatgoes alongwithhertariff
agenda
{tf}. She musttherefore
guaranteeat leastthesame payoffto thelegislatorsshe
courtsas theywouldreceiveunderthestatusquo.31Perssonshowsthattheagenda
setterwill set an agendathatformsa minimum
winningcoalitioncomposedof a
suchthat(1) legislators(sectors)outsideof thewinningcoalition
simplemajority
eventhoughtheybearpartof thewelfareloss,(2) thememgetno tariffs/subsidy
bersof thewinningcoalitiongetjust enoughprotection
/subsidythattheyare not
worseoffthanin thestatusquo.
29. Persson1998.
30. In Persson'smodel legislatorsmayeach attachdifferent
weights.We presumeall legislators
attachthesamepositiveweight.
3 1. In thepresenceof the welfareloss constraint,
she mustsacrificesome rentsthatwouldhave
otherwisegone to herdistrictin orderto forma coalitionof legislatorsthatwould implement
her
agenda.More on thisbelow.
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WhatGovernments
Maximizeand Why 509
resultis thatintensecompetition
The logicbehindthisstark,ratherpessimistic,
amonglegislatorsto be partof thewinningcoalitionenablestheagendasetterto
drivesdownthe"price"(or weakenstheterms)a
dictateterms.This competition
legislatorcan chargetheagendasetter.The agendasetteruses herpowersto prosincethecompetition
vide thehighestrentspossibleto herdistrict,
amonglegislatorsendowsherwithbargaining
power.
The same logic drivestheresultswhenwe introducelobbyingintothegame.
has an organizedlobbythatmakescontributions
to
Supposeeverysector(district)
Theirfiercedesireto have theirlegislatorbe partof thewinning
theirlegislator.
coalitioncedes anybargainingabilitytheymayhave to theagendasetter.Their
resultin
are unableto movetheagendain theirfavor.An interesting
contributions
of theagendasetter
thelobbyinggameis thatsinceno sectoroutsidethedistrict
close to zero.32
receivesanyprotection
theycontribute
/subsidy,
Checksand Balances. Checksagainsttheagendasetter'spowersmaybe placed
overpolicyat thenationallevel,say,a president.
by an individualwithinfluence
consistsof a specificlimiton welfarelosses frompricedisHis policyplatform
tortions.Our exogenouslyspecifiedlimiton welfareloss is thusmotivatedas a
checksandbalances.Once again,thesameconclusionapplieswayofinstituting
stillenablestheagendasetterto getawaywithwhat
amonglegislators
competition
is thattherentsareloweriftheelectedpresident's
rentsarepossible.The difference
thanthestatusquo.33
is morelimiting
platform
Clearly,a directway of enhancingthe bargainingpowerof legislatorsother
andthuscheckingherpowers,is via a bindinglimiton the
thantheagendasetter,
Such a nationalpolicywouldthen
rentstheagendasettercan directto herdistrict.
allow thelegislativebargaining
Regardgame to allocaterentsto otherdistricts.
- limitson theamountof totalwelfare
less, bothtypesof presidential
platforms
- will resultin a
loss, or limitsto therentsaccruingto theagendasetter'sdistrict
does
not
allow
lowerredistribution
representacomparedwitha legislaturethat
We statethefirst
tionofa nationwide
hypothpolitycapableofcheckinglegislators.
esis fromthelegislativebargaining
game.34
H5: Executivecheckswilllimittheabilityoflegislatorsto imposetheirpolitically
associatedwithhighervalues
optimalwelfarelosses. Greaterchecksare therefore
ofdi.
modelin deterelectoralcompetition
thetwo-party
32. The modelmaybe extendedto incorporate
in theparamacrossdistricts
a district.
Then,thediversity
miningthelegislatorchosento represent
whichlegislators
Thismaywelldetermine
a parameter.
eachlegislator's
thenunderlies
etersa, h,f,and</>
are in thewinningcoalition(thatis, thecheapestfortheagenda setterto buyoff),butthefactstill
remainsthatcompetition
amonglegislatorswill lead to thesamepolicy.
33. Persson,Roland,and Tabellini1997 give deepermeaningto whatit meansfortheexecutiveto
via separationof powers.
wieldchecksand balances,specifically
34. The legislativebargaininggame has an additionalstep: theexecutivechooses a limiton the
The otherthreestepsfollowas before.
totalwelfareloss (or therentsto theagendasetter'sdistrict).
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510 International
Organization
Ourfinaltwohypotheses
andfeatureelectoral
go beyondtheexistingliterature,
fortheexecutive.An unsatisfactory
competition
aspectof legislativebargaining
thattheexecutiverepresents
medianvoterinterests.
In
theoryis its presumption
mostreal-worlddemocraciestheexecutiveis electedand lobbied.We therefore
embedthe two-party
electoralcompetition
game intothe legislativebargaining
model.
Electoral Competitionfor the Executive. Two candidates,representing
parof the
tiesA and B respectively,
contestthepresidential
election.The structure
for
game is essentiallysimilarto thegame used to modelelectoralcompetition
conThe
main
here
is
that
the
seats.
difference
legislative
platforms
presidential
cernnotthetariff
butlimitson thetotalwelfareloss fromtradeprotection
directly
suchas
denotedL. The executiveis presumedto maximizean objectivefunction
the
is
L
determined
conthat
set
of
tariffs
t
are
(4),
(the
equation except
argument
ditionalon L, see (13) below). Whenthereare no lobbies,theexecutiveseeksto
maximizesnationalwelfareand setsL = 0, eliminating
thepossibility
of anytariffor subsidy.Lobbiesrepresenting
to move
import-competing
producersattempt
L awayfromzeroso thattheymightbenefit
fromtariffs,
on L, thatare
conditional
decidedin thelegislativebargaining
process.
as theoutcomeof thetwo-party
elecThe cap on welfareloss,L, is determined
tionin whicha nationalpolityofinformed
votersparticipate.
anduninformed
Thus,
L foreach of thetwopresidential
candidatesis determined
as theNashbargaining
solutionto35
Max£n* = 0*]£^(L)
i
+
a
7W(L),
h
K = A,B,
(13)
whereWi{L) is the(netof contributions)
welfareof thelobbyfromdistrict
i and
ofuninformed
W(L) is thewelfareoftheaverageinformed
voter,a is thefraction
of viewsaboutthetwopartiesamongvoters,and
voters,
/quantifiesthediversity
h is productivity
of campaignspending.</>P
is theprobability
that,once elected,
thepresident
is able to getthelegislature
to adoptL.
- the
The firstresultfollowsdirectlyfromequation(13). The parameter<f>p
ofsuccessfully
candidateK's executiveplatformdetermines
probability
legislating
theweightthatspecial interests
get in theexecutiveelectoralcompetition
game.
If (j)p is non-negative
thenthefirsttermon theright-hand
side of equation(13)
indicatesthatL is selectedto be greaterthanzeroby bothcandidates.Thus,electoralcompetition
withlobbiesand uninformed
votersinducesbothcandidatesto
imposewelfareloss on the nationalpolity.The parameters
a, h, and/ workto
35. The logic behindequation(13) is similarto the logic behindequation(12) in the legislative
electoralcompetition
game.
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WhatGovernments
Maximizeand Why 511
fortheexecchangea in thesame directionwhenthereis electoralcompetition
forseatsin legislature.
utiveas theydid withelectoralcompetition
We statethis
as thenexthypothesis.
hypothesis
H6: Electoralcompetition
for theexecutiveis associatedwithlowervalues of a
thaniftherewereno electoralcompetition
for theexecutive.
the parametercf)£determinesthe executive'sabilityto impose
Importantly,
is undivided,thatis, whenthe
checkson legislature's
powers.Whengovernment
bothbelongto thesame party,theexecutive'splatform
executiveand legislature
divided.36
thanweregovernment
is morelikelyto makeitpastthelegislature
Thus,
themoretheexecutive
(undividedgovernment),
(13) impliesthatthehigheris cf>p
at theexpenseof the
of candidateK is bentto satisfying
specialinterests
platform
theexecutiveis a more
if <f)pis low (dividedgovernment),
public.Conversely,
effective
checkon thelegislature's
abilityto imposewelfarecostson thepublic.37
We statethisas ourfinalhypothesis.38
leads to highervaluesof3.thanifthepartyoftheexecH7: Dividedgovernment
utivewerethesame as themajority
partyin thelegislature.
Explainingthe Variationin a: Data and Results
Data
over economicand politicaloutRecentinterestin the influenceof institutions
databasesof politicalinstitutions.
comes has led to thecreationof cross-country
Database on PoliticalInstitutions
We drawon thehigh-quality
(DPI) constructed
The databasecontainsa numberof variablesmeasuring
byBeck and colleagues.39
thenatureof "government,"
"executive,"and "federalism."
They
"legislatures,"
and admirablyserveour purand quantitatively,
are measuredbothqualitatively
We also use ecothevariablesrequiredto testthehypotheses.
pose of measuring
Indicators
nomicdatafromvariousissuesoftheWorldDevelopment
(WDI). Media
Trends(WAT).40
costdata are fromWorldAdvertising
36. See, forexample,Elgie 2001.
advancedby Lohmannand O'Halloran 1994, is thata dividedgovern37. An oppositeargument,
witha clearmajorwhilea government
mentdoes notdelegatepolicymakingpowersto thepresident,
sinceeach legislatorcaresabout
favorsprotectionism
does. Dividedgovernment
ityin thelegislature
and notthesocial costs.
to theirown district
and costsof protection
privatebenefits
38. Our workingpaperwiththe same titleshows how the legislativebargainingtheorymay be
completed.
39. Beck et al. 2001.
Trends1998.
40. WorldAdvertising
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512 International
Organization
The theoryuponwhichwe base theempiricalinvestigation
requiresus to consideronlydemocracies.41
We relyon thevariableLIEC (LegislativeIndexofElectoralCompetitiveness)
in theDPI databaseto identify
democracies.LIEC scores
varybetween1 (no legislature)and 7 (largestpartyreceivedless than75 percent
oftheseats).Lowerscoresaregivento unelectedlegislatures
(score= 2) or ifthe
=
is electedbutcomprises
legislature
justone candidate(score 3) orjustone party
(score= 4). Countrieswithscoresof 4 or less are notconsideredto have legislain whichmultiple
turesfeaturing
electoralcompetition.
partiesconOnlycountries
inthesample.
testedforseatsin thelegislature
(scoresof5 ormore)areconsidered
theparameter
forwhichwe haveestimated
countries
a, only
Amongthefifty-four
fourare droppedon thiscount(China,Hong Kong,Ethiopia,Taiwan).42
electedusinga propor(1), requiresidentifying
Testinghypothesis
legislatures
- whereseatsare allocatedon thebasis of theprotionalsystemofrepresentation
- versusa pluralitarian
The
system.43
portionof votesreceived
first-past-the-post
vervariablehousesys in theDPI is used to identify
countrieswithproportional
of
sus pluralitarian
systems,housesys is coded 1 in theDPI onlyif themajority
thehouse is electedon a plurality
basis. We definethebinaryvariableproportionality = 1 - housesys to indicatelegislatures
in whichpartiesare (largely)
to thevotestheyreceive.44
represented
proportionally
We mustreconcilethetheoretical
model,whichadmitsonlytwoparties,with
thepresencein ourdataof manycountrieswithmultiparty
How the
governments.
of successfully
of thepartyin powerchanges
probability
legislatingtheplatform
whenthereare morethantwopartiesis themainquestionthatmustbe addressed.
The greaterthisprobability
the greaterthe weightgivento
(thatis, large<f>K),
in equation(12), and theloweris a. In a government
specialinterests
comprising
morethanone partyand/oran oppositionthatalso comprisesa coalitionof parof successfully
thewinningparty'splatform
ties,theprobability
legislating
hinges
45
on partyconcentration
andcohesiveness
PowellandWhitten46
have
Furthermore,
economicvoting(givingthegovernment
creditor blame
arguedthatretrospective
41. A recentliterature
has arguedin favorof democracieson thebroaderissue of whether
democraciesproducebettertradepolicyoutcomesthannondemocracies.
See Milnerand Kubota2005; and
Mansfield,Milner,and Rosendorff
2000, 2002.
42. Taiwanhad an LIEC scoreof 2 duringtheearly1990s,theperiodfromwhichwe used datato
estimateitsa.
43. The influenceof proportionalversusothersystemsof electinglegislatureshas been well
researchedin thecontextof protection.
See Mansfieldand Busch 1995; Willmann2005; and Evans
2008.
44. The DPI containsthevariablePRthattakesthevalue 1 if anycandidatesare electedbased on
theproportion
of votesreceivedbytheirpartyand0 otherwise.
Even a smallfraction
thelegislature
is
electedusingboth,thenpr is coded 1. Anothervariableplurality does similarlyforpluralitarian
systems.A problemwithusingeitherof thesemeasuresis thata numberof countrieshave pr = plurality = 1, indicatingthepresenceof bothsystems.Codingaccordingto housesys is cleanerand
leads to a measurethatis eitherproportional
or pluralitarian,
butnotboth.
45. See, forexample,McGillivray1997.
46. Powelland Whitten1993.
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WhatGovernments
Maximizeand Why 513
foreconomicoutcomes)will be morelikelytheeasierit is forvotersto attribute
economicoutcomesto a particular
partyor coalition.So morecohesivecoalitions
incentives
to use economicpoliciesforpoliticalpurposes,whilelooser
havegreater
ones have fewerincentives.47
We extendthehypothesis
aboutproportionate
versusmajoritarian
systemsby
indicesofparty
proportional and(1 - proportional) withHerfindahl
interacting
in thegovernment
concentration
(herfgov) and opposition(herfopp).We define
thedifference
govcohesion = herfgov - herfoppto measurepartycohesionin
The greateris herfdiff,themorecoherelativeto theopposition.
thegovernment
the
sive is thegovernment
coalition;thesmalleris herfdiff,themorefractured
and/orthemoreunitedtheopposition.We use thetwo interactions,
government
PROP + GOVCOHESION = PROPORTIONALX HERFDIFF and PLUR + GOVCOHESION = (1
- proportional) X herfdiff,to testtheidea thatplurality
plus partycohesion
successin legislativevotingovernment
(relativetotheopposition)leadsto greater
plus partycohesionwithinthegovernment.
ingthanproportionality
HI. 2: A majoritarian
systemwithcohesionamongpartiesinpowerfavorsspecial
more(thatis, have lowera's) thandoes a proportional
interests
systemwiththe
samepartycohesion.
a of
modelswithlobbyingis thefraction
At theheartof electoralcompetition
of whatitmeansforvotdimensions
voters.We capturetwodifferent
uninformed
In theGH96 model(and theBaronmodeluponwhichit
ersto be "uninformed."
voterswho do notknowthepolvotersare impressionable
is based) uninformed
votersas impresicy positionsof candidates.We capturetheidea of uninformed
of the
sionablevotersusingtwo variables.The firstvariableis the proportion
measuresthatpartof the
(illiteracy), whichdirectly
populationthatis illiterate
populationwhose opinionsare morevulnerableto campaignspending.Thereis
someevidencethatlowerliteracyis associatedwithbeinguninformed
politically,
A primary
evenin developedcountries.
surveybyBlais andcolleagues48of Canadianvotersindicatedthathighschooldropoutsindicatednotknowingabouta large
of high-profile
politicalcandidates,relativeto thosewho had comproportion
In developingcountriesthisproblemis worse.Bardhanand
pleteduniversity.
add thatpoliticalcaptureby lobbiesin developingcountriesis (1)
Mookherjee49
decreasingin theaveragelevel of politicalawareness,and (2) increasingin the
awarenessdisparityacross economicclasses. These, in turnare correlatedwith
and poverty.
illiteracy
to seek
47. In orderto admitmorethantwo parties,we assumethateach partyuses its platform
absolutemajorityin thelegislature.The
maybe bentafterthecoalilargestwinningparty'splatform
butin its finalformit is close to thewinningparty'splatform.
tionformsin legislature,
48. Blais et al. 2000, tab. 1.
49. Bardhanand Mookherjee2000.
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514 International
Organization
The secondvariableis theproportion
ofthepopulation
thatis urbanized(urbanevidencein develization). It capturestwo ideas. One is thewell documented
than
thatruralvotersare likelyto be less informed
oped and developingcountries
between
information
urbanvoters.In Majumdar,Mani,andMukand50
discrepancy
ruraland urbanpopulationsis thereasonwhyurbanareasgetmorethana disproshareof publicgoods. Ruralresidentsare poorlypositionedto ascerportionate
of government
taintherelativeimportance
neglectversusexogenousshocksin
bringingabouta low outputin ruralareas.51Activemedia and bettereducation
will therefore
maketheurbanpopulationless easy to fool.A government
expend
morefavorableurbanoutcomes,despitethefactthatthey
resourcesin generating
areoutnumbered
Majumdarandcolleaguespresentstrikbytheirruralpopulations.
and
divide (measuredby newspaperreadership,
ing factsaboutthe information
betweentheruralversusurbanpopulapercapitaradioand televisionownership)
document
tionsin Nepal,Pakistan,India,and Philippines.
Theyespeciallystarkly
thedifference
in literacyratesin thepoorerAsianandLatinAmericancountries.52
variationin litThus,whilethevariableilliteracy capturesthecross-sectional
diferacyacrossoursample,thevariableurbanization capturestheintracountry
voters.53
ferencesin informed
versusuninformed
makedenselypopulatedurbanareas
The secondis thatinformation
externalities
Scale economiesafforded
by urban
naturally
positionedto obtaininformation.54
agglomeration
supportan explosionof radio stations,TV channels,and newspapers,whilethesmallerand morescatteredruralpopulationselude thesescale
economies.The news barragethataccompanieselectionsis morelikelyto sway
theruralpopulationunusedto theblitzthanthemorehabituated
urbanpopulation.
The diversity
of viewsaboutcharacteristics
of thepartiesotherthantheirtrade
in hypothesis
(3)) is measuredbya variablelrdipolicypositions(theparameter/
vide thatindicatestheleft-right
dividebetweenthelargestpartyin government
andthelargestpartyin opposition.55
It takesthevalue 1 iftheformer
leansleftor
rightand the latterleans the otherway. If bothlean the same way,or if either
thenthetwo sides are notconsideredto be ideologicallypolarpartyis centrist,
are strongin
ized, and lrdivide takesthevalue 0. If extra-issuecharacteristics
themindsof voters,thentheywill notturnawayfromtheirpreferred
partieseven
50. Majumdar,Mani,and Mukand2004.
51. Despitethepoorgovernment
responseto weathershocksin February2008 in China,the(genChinesepopulationblamedtheweathermorethantheirgovernment.
The more
erallyless informed)
informed
of theirgovernment
fortheirlaxityduring
populationof theU.S. weremuchless forgiving
HurricaneKatrinain 2005.
52. Majumdar,Mani,and Mukand2004, tab. 1.
53. DuttandMitra's2002 findings
can workbothways:an increaseininequalsuggestthatinequality
economiesand lowersthemin capital-scarce
economies.
ityraisestradebarriersin capital-abundant
Since urbanization and illiteracy are bothpositivelycorrelatedwithinequality,
thisfinding
suggestswe shouldfindevidenceforor againstthishypothesis.
54. See, forexample,Stromberg
2004.
55. In theDPI theyare,respectively,
fgovrlc and fopprlc.
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WhatGovernments
Maximizeand Why 515
whenthosepartiesdistortpoliciesand imposewelfarelosses on them.The leftrightdivideengendersstrongpriorsand ideal positionsin the mindsof voters,
thiscentralidea behindhypothesis
thuscapturing
(3).56
of campaignspendingparameter
h in
We measurethe(inverseof) productivity
scaledbygrossdomesticproduct(GDP)
(4) byadvertising
expenditures
hypothesis
in 1996, usingdata on mediacostsfromWAT.Missingdata weresupplemented
dollarsspentin
Since it measuresthenumberof advertising
fromEuromonitor.57
orderto "generate"a country's
GDP, or netsales,theadvertising
expenditure-toof advertisingexpendiGDP ratiomeasuresthe (average) inverseproductivity
of advertising
tures.SinceTV advertising
expenditures,
comprisesa largefraction
accountingforbetween30 percentand 60 percentformostcountriesin thesamspendingscaled
ple,we employthevariabletvadvertising_gdp= TV advertising
variabletotaladvertising_gdp
byGDP.58Resultsusingthemoreencompassing
= totaladvertising
newspapers,
magazines,radio,
spendingon all media(including
andTV) scaledby GDP are similarto thosewe report.The (inverse)productivity
ofadvertising.
h is thusmeasured
ofcampaignspending
bythisinverse-productivity
The variablechecks in theDPI is used to measureexecutivechecksand balances on thepowersof legislators(hypothesis(5)). checks takesintegervalues
between1 (Indonesiaand Mauritiusin our sample)and 15 (India).59The theory
theinterests
of themedian
presumesthattheexecutiveis presumedto represent
influenceon theagenda setter.The variable
a restraining
voter,and is therefore
checks answersthe questionof whetherthisis truein the data. Since checks
on issues,
of thesystemto duel thelegislature
gradesaccordingto thepropensity
tradepoliciesin
56. Duttand Mitra2005 findthatleft-wing
governments
adoptmoreprotectionist
butadoptmorepro-trade
countriesthanright-wing
countries,
govpoliciesin labor-rich
capital-rich
lrdivide with
and so we do notinteract
ernments.
Our theorydoes notmakethissubtlerdistinction,
and empiricallyin future
the capital-laborratio,but thisextensionis worthexploringtheoretically
research.
costis theprice
International
2004 and 2008. An ideal measureof advertising
57. See Euromonitor
or thecost of a commercialper viewer(for
dividedby theviewership,
per 30-secondadvertisement
2007). However,such a viewershipmeasureis notavailableat thescope of our
example,Stratmann
and we use a proxyforthisideal measure.
setof countries,
2006 documenttheSwedishexperiencebeforeand aftertheentryof com58. Pratand Stromberg
TV newsincreasedtheirlevel of
mercialTV. Theyfindthatpeoplewho startedwatchingcommercial
They
politicalknowledgemorethanthosewhodid not,and also increasedtheirpoliticalparticipation.
voters.
ex ante uninformed
concludethatcommercialTV newsattracts
elected.
59. The variablechecks equals one forcountrieswheretheexecutiveis notcompetitively
incremented
checks is incremented
byone ifthe
byone ifthereis a chiefexecutive,checks is further
elected,checks is thenincremented
chiefexecutiveis competitively
by one iftheoppositioncontrols
the legislature.In presidential
by one (1) foreach chamberof the
systems,checks is incremented
in thelowerhouseand a closed listsystemis in
unlessthepresident's
partyhas a majority
legislature,
of the
controlof her party,and therefore
effect,(a closed list systemimpliesstronger
presidential
and (2) foreach partycoded as allied withthepresident's
partyand whichhas an ideolegislature),
closer to thatof the mainoppositionpartythanto thatof the
orientation
logical (left-right-center)
by one (1) foreverypartyin the
systems,checks is incremented
party.In parliamentary
president's
and (2) foreveryparty
coalitionas longas thepartiesare neededto maintaina majority,
government
closer to the
coalitionthathas a positionon economicissues (right-left-center)
in the government
largestoppositionpartythanto thepartyof theexecutive.
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516 International
Organization
itis a moresophisticated
We therefore
measurethanrequiredbythetheory.
experimentwitha binaryreductionof checks (BinarycHECKs)
thatsimplymeasures
theexistenceof checks,as requiredby thetheory.60
of supThe dilutionof theexecutive'sabilityto championa stringent
platform
helpfromspeportforthemedianvoterwhentheythemselves
requiremonetary
of executive
cial interests
to winelections(hypothesis
(6)) requiresmeasurement
electoralcompetition.
The DPI variableeiec (executiveindexof electoralcompetition)is well suitedforthispurpose,eiec variesbetween1 and 7, where1 indiinexecutiveelections.
themostseverecompetition
catesnoexecutiveand7 indicates
In our sampleeiec = 2 fortwo countries(Indonesiaand Mauritius)specifying
unelectedexecutive,eiec = 6 forthreecountries
(Egypt,Romania,andSingapore)
andthelargestparty
thatcandidatesfrommorethanone partycontested
specifying
receivedmorethan75 percentof thevotes,and eiec = 7 forall othersspecifying
thatcandidatesfrommorethanone partycontestedand thelargestpartyreceived
witha binaryversionofeiec
less than75 percentofthevotes.We also experiment
(beiec) wherebeiec = 0 ifeiec < 7, and beiec = 1 ifeiec = 7.
The finalhypothesis,
aboutdividedgovernment
(hypothesis(7)), measuresa
specificsourceof checkson thepowersof the legislature.We measuredivided
whether
withtwovariables.The first,
allhouse fromtheDPI, indicates
government
in thehousesthathave lawmakthepartyof theexecutivehas absolutemajority
is divided
ing powers.If so, allhouse takesthevalue 1, otherwisegovernment
and thevariabletakesthe value 0. The secondvariable,esimilarity,measures
whether
theexecutiveand thelargestpartyin government
are ideologicallysimilar.It takesthevalue 1 if,whentheexecutiveis leftistor rightist
the
or centrist,
is divided
Otherwise,government
largestgovernment
partyalso leans similarly.
andesimilaritytakesthevalue0. Perhapssurprisingly,
thetwovariablesareuncorrelatedin oursample.We notethatthevariablechecks, used to measurecontrol
of thelegislature
bytheexecutive,also subsumesthecase ofdividedgovernment.
In fact,theempiricalcorrelation
betweenallhouse andchecks is approximately
-0.50. To someextent,
therefore
checks, allhouse, andesimlarityareall legitimatemeasuresof dividedgovernment.
Results
Table 3 presentsdescriptive
statistics
forvariablesjust describedfromthesample
of fifty
democracies.The dependentvariablewe will use is the log of theestimated<z's.Its outstanding
characteristic
is thatit satisfiesnormality
and is thereforeoutlier-free.
This is a usefulproperty,
sincesmallclustersofobservations
can
no longeroverlyinfluence
theoutcomeof theregression.
Abouthalfthesampleuses a primarily
proportionate
systemof representation
in thelegislature,
and halfprimarily
use plurality.
The samplemeanforilliter60. de Figueiredo2002 findsthatwhenpoliticalturnover
is likelyto be high(here,BinarycHECKs
is fractured.
equals 1), theexecutivesis moreable to maintainchecksif government
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Su
i '-5«=
518 International
Organization
acy is 13.4percent
andforurbanization is 61.7 percent.
Bothvariableshaveconsiderablevariation
acrossthesample.36 percent
inthesamplehave
ofthecountries
(lrdivide). The averagespendingon TV
ideologicallywidelydividedlegislatures
advertising
per dollarof GDP variesfrom.003 cents(veryproductive)to 6.867
are there
cents(unproductive),
withan averageof 2.1 cents.In onlytwocountries
= 1). In 90 percheckson thelegislature
stringent
bytheexecutive(BinarycHECKS
centofthesample,theexecutivefaceselectoralcompetition
(beiec = 1). In 46 percentof thesample,government
is politicallyundivided(allhouse), whilein 80
is ideologicallyundivided(esimilarity= 1).
percentof thesample,government
The centralempiricalresultsarepresented
inTable4.61A concernwithusingthe
the
estimated
a's as thedependent
variableis thatithas extremevalues,implying
existenceofoutliers.
Forexample,a is estimated
at404.0 forSingaporebutthenext
test62strongly
rejectsthe
highestis only37.8 (Japan).Indeed,theShapiro-Wilk
thatthea's came froma normallydistributed
population.ln(«), howhypothesis
modelsinTable4 do
test.The errortermsfromthefitted
ever,passesthenormality
attestto the
as well (see testsat thebottomofthetable).The adjustedR2 statistics
variablechecks andeiec
adequatefiton themodels.Model 1 uses thecontinuous
while
tocapturetheimpactofexecutivechecksandexecutiveelectoralcompetition,
Model 2 uses theirbinaryversions(BinarycHECKS
and beiec).
versuspluralitarian
to theliterature
on proportional
systemsas sources
Contrary
of diversepolicyoutcomes,we findthatthischoice has no influence
on governments'welfare-mindedness.
Thisfinding
is infactconsistent
withtheGH96 assumptionof twopartiesand thecountry
whichimplies
votingas a singleconstituency,
thatthetwo systemsare equivalent.The rejectionof hypothesis
(1) mayalso be
- thethree-party
due to theexistenceof manypartiesin thesystem
examplethat
motivatedthehypothesis
of protectionist
may simplyexaggeratetheprobability
bias in majoritarian
versusproportional
of proportionalsystems.The interaction
coefficient,
itywithlegislativecohesionhas a positiveand statistically
significant
thatproportionality
indicating
plus a legislaturein whichthereare fewerparties
in thegoverningcoalitionthanin theopposition,leads to a greaterconcernfor
welfare.But so is thecoefficient
on the interaction
of pluralitywithlegislative
cohesionin Model 1. Further,
theirsizes are statistically
thesame,indicating
that
or plurality,
is thedrivingforcebehind
legislativecohesion,notproportionality
theresult.Thus,Model 1 rejectshypothesis(1.2) as well. While Model 2 finds
it is weak. We concludethata is determined
notby
supportforthishypothesis,
61. We will maintaintheexogeneityof all regressors
on thegroundsthattheyare unrelated
to the
errortermoftheregression.
Thatis, shocksto a do not"cause" changesin anyofthesevariables.This
is in keepingwitha basic premiseof ourinquiry,
as in theliterature
to dateon institutions
as a source
of thequalityof policyoutcomes,thatinstitutions
outcomes.To theextentthat
pre-dateanddetermine
thereis stasisin institutions,
institutions
reactto pooroutcomesbutthe
theyareexogenous.Certainly,
on otherinstitutions
morethanthesourceof theshock(see, forexamabilityto do so is conditioned
ple, Bueno de Mesquitaet al. 2003).
62. Shapiroand Wilk 1965.
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WhatGovernments
Maximizeand Why 519
TABLE4. Hypothesistestsaboutdeterminants
ofa OLS estimates:dependent
variableIn(a)
Variable
Hypothesis
versusplurality
EC: Proportional
(HI)
proportional
versusplurality
EC: Proportional
(HI. 2)
prop+legcohesion
versusplurality
EC: Proportional
(HI. 2)
plur+legcohesion
EC: Uninformed
voting(H2)
illiteracy
EC: Uninformed
voting(H2)
urbanization
to party(H3)
EC: Ideologicalattachment
lrdivide
of mediaspending(H4)
EC: Productivity
tvadvertising_gdp
LB: Executivecheckson legislators(H5)
checks
LB: Executivecheckson legislators(H5)
BinarycHECKS
LB+ EC: Executiveelectoralcompetition eiec
(H6)
LB+EC: Executiveelectoralcompetition beiec
(H6)
allhouse
LB: Undividedgovernment
(H7)
LB: Undividedgovernment
(H7)
esimilarity
Constant
N
AdjustedR2
Tests(p-valuesreported):
Hypothesis1.2
Normality
of ln(a)
Normality
oferrors
Model 1
Model 2
0.037
[0.11]
1.46
[2.71]***
1.376
[2.55]**
-2.759
[2.76]***
3.821
[3.79]***
-0.746
[2.20]**
0.214
[1.65]
0.153
[3.24]***
-0.102
[0.32]
0.99
[1.90]*
0.338
[0.62]
-3.665
[3.52]***
3.175
[3.89]***
-0.688
[2.19]**
0.211
[1.75]*
-0.368
[3.60]***
-0.296
[1.03]
0.326
[0.99]
0.537
[0.59]
50
0.67
0.368
0.209
0.934
1.809
[3.88]***
-1.576
[3.61]***
-0.369
[1.31]
0.496
[1.65]
0.68
[0.90]
50
0.72
0.901
0.209
0.779
standarderrors)in parentheses.
Notes:Absolutef-statistics
(usingWhite-corrected
"LB" = legat 10%, ** at 5% and *** at 1% "EC" = electoralcompetition
♦denotesstatistical
theory,
significance
testsreportp-valuesfortheShapiro-Wilktest.
islativebargaining
Normality
theory.
in the
butbypartyconcentration
or pluralitarian,
a systemis proportional
whether
in
coalitionversustheopposition government.
governing
Since illiteracy and urbanization measurevoterinformedness,
theyserve
the
that
of electoralcompetition
to testthecentralpresumption
theory attracting
interest
to
votersmakepolicyplatforms
votesof uninformed
responsive special
of uninformed
votinghas strongempiricalbacking.The
money.The centrality
in the expecteddirecon bothmeasuresare statistically
coefficients
significant
The
tions.Even moreimportant,
theyare politicallyand economicallysignificant.
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520 International
Organization
coefficients
implythatan increasein illiteracyof 0.10 decreasesa by 27.59 perof0.10 increasesa by38.21 percent.Hypothcent,andan increasein urbanization
- is
of votersthatare uninformed
esis (2) - a's relationship
withtheproportion
thusstrongly
validated.Theseresultssuggestthatthesourceofthedividebetween
havelargely
notedinTable2 is thatless developedcountries
poorandrichcountries
ruralas well as less literatepopulationsthandevelopedcountries.For thosereasons,less developedcountrieshave lowera's.
The greaterthe ideologicaldivide
Hypothesis(3) is also stronglyaffirmed.
a
theloweris a. All else constant,
betweenpartiescontesting
forthelegislature,
withcontesting
country
partiesthatare ideologicallyclose (lrdivide = 0) has an
a thatis 74.6 percenthigherthanin a country
withpartiesthatare ideologically
farapart(lrdivide = I).63Thus,thelargertheirunshakeablevoterbase,themore
theirplatforms
sincethepartiesdo notfearlosingvoters
caterto specialinterests,
overtradepolicycontests.
to
of expenditures
The estimatesaffirm
hypothesis(4) abouttheproductivity
is each TV advertising
dollar,
sway voters.We findthatthemorecost-effective
dollaris able to
is government.
Thatis, ifan advertising
theless welfare-oriented
convertmanyuninformed
voters,theneconomiclogic dictatesmoreadvertising
dollarsare spent.Since lobbiesarethesourceofthesupplyof advertising
dollars,
The quantitative
are pushedin theirdirection.
impactis notable.
policyplatforms
The resultsshowthata decreasein tvadvertising_gdpby 1 (thatis, a decrease
in TV advertising
revenueof $1 per thousanddollarsof GDP) raisesa by 21.4
Thisfinding
has implications
forthedifference
in thewelfare-mindedness
percent.
of developedversusdevelopingcountries.Since developingcountrieshave much
lowerratiosof tvadvertising_gdpthandevelopedcountries,moreproductive
mediadollars(combinedwithgreaterproportion
of votersthatare uninformed)
are anotherreasonwhytheirgovernments
are less welfareminded.64
bothmeasuresof checksand
Turningto thelegislativebargaining
hypotheses,
balances(checks in Model 1 and BinarycHECKS
in Model 2) arepositiveand staAn increasein checks of one standarddeviation(around2)
tisticallysignificant.
is associatedwitha 30.6 percentincreasein a, all else constant.
In mostcountries
checks fallsin the 1-7 range,withIndia as the sole extremedata pointwitha
scoreof 15. The Indiaobservation
be influential
in determining
the
maytherefore
coefficient
on checks. RecodingtheIndia value to,forexample,8 or
regression
or politicalsignificance
of checks (thecoefficient
9, does notalterthestatistical
is largerthoughless precise).
63. A moreprecisemeasureofthisimpactthattakesintoaccountthevarianceoftheestimate(Kennedy 1981) showsthata countrywithlrdivide = 0 has an a thatis 55 percent(obtainedas e^~l/
- 1, where is theestimated
coefficient
on lrdivide, and Var(fi)itsvariance)higherthanin a
2Var(p)
/3
withlrdivide = 1, all else constant.
country
64. In Morocco,Bangladesh,
SriLanka,Nepal,Egypt,
Guatemala,
Pakistan,
Bolivia,India,Cameroon,
Romania,Kenya,Turkey,and Malawi thisratiois less than1, indicatingadvertising
is manytimes
cheaperperdollarof GDP thanin developedcountrieslikeJapanand theUnitedStates.
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WhatGovernments
Maximizeand Why 521
and a powWhenBinarycHECKS
equals 1, it indicatesa fractured
government
erfulexecutive(theabilityof theexecutiveto checkthepowersof thelegislature
variablegivesthebestchance
Thisdefinition
oftheBinarycHECKS
aremagnified).65
ratherthanone wheretheexecutiveis definedto be
forthetheoryto perform,
onlymarginally
powerful.The theoryholdsup well.The estimatesimplythat,all
= 1)
checksby theexecutive(BinarycHECKS
else equal, countrieswitheffective
thatis 180.9 percentmoreexpensivethan
tradeoff
have a welfare-for-lobbying
oftheidea thattheexecutivecan effecwithout
checks.This affirmation
countries
to selloutis all themoreremarktivelywieldcheckson theabilityofthelegislature
= 1 foronlytwocountries
- IndiaandPakistan.
thatBinarycHECKS
ableconsidering
thenthesameforcesthatcame
Iftheexecutivemustfaceelectoralcompetition,
of legislatorsalso come intoplay here.Since
intoplay in shapingtheplatforms
ofcandidatesfortheexecovertheplatforms
nowwieldinfluence
specialinterests
of theexecutive.The
reducesthewelfare-mindedness
utive,electoralcompetition
thismechanism.
affirm
resultsstrongly
Both,theexecutiveindexofelectoralcomand politicallysignifipetitioneiec and its binaryversionbeiec are statistically
in whichtheexecutivedoes not
cant,beiec indicatesthat,all else equal,a country
at thepolls has an a thatis 157.6 percentmorethana country
face competition
whose executivedoes. The finermeasureeiec indicatesthatan increasein the
one standarddeviation)lowersa by 36.8 percent.
indexof 1 unit(approximately
fortheexecutivediminishes
As arguedtheoretically,
greaterelectoralcompetition
thepositiveimpactof executivecheckson a. Since theofficeof theexecutiveis,
moreoftenthannot,a competitive
selection,thisextensionto thelegislativebarbringsit closerto thereal world.
gainingliterature
does notappearto have anyimpacton a aftercontrolUndividedgovernment
on dividedgovliterature
lingfortheothervariables.To be fairto thetheoretical
are also
variableschecks and BinarycHECKS
theelectoralcompetition
ernments,
The highcorgood measuresof theincidenceand extentof dividedgovernment.
that
relationbetweenallhouse and checks of -0.50 also empiricallyaffirms
The aforementioned
checks picksup theeffectof dividedgovernment.
findings
causes lowers«'s, in
aboutthesetwo variablesimplythatdividedgovernment
thatshow that
keepingwithour theory(and othermechanismsin the literature
can cause good policyoutcomes).If checks and Binarydividedgovernments
ratherthanmeasuresof the
checks reallyare measuresof dividedgovernment
abilityof theexecutiveto imposechecks,in orderto testthebasic preceptof the
theory(hypothesis(5)), we wouldneed a samplein which
legislativebargaining
Unforhaveno (electedorunelected)executive,onlya legislature.
somecountries
oursamplehas no suchcases and does notallow thatexperiment.
tunately,
weretestedusing
andthea parameter
aboutinstitutions
ofhypotheses
A number
is strongest?
Table 5 reports
theestimatesin Table 4. Whichof thoseinfluences
of thevarithatmaybe used to comparetheinfluence
betacoefficients
unit-free
65. See fn59.
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522 International
Organization
ables. These coefficients
simplyindicatethenumberof standarddeviationsthat
thedependent
variablechangesifan independent
variableis increasedbyone stanover its
darddeviation.As such,thismeasurefavorsthe size of thecoefficient
statisticalprecision,urbanization has the largestinfluenceon a, makingthe
force
as an important
voterhypothesis
standoutamongthehypotheses
uninformed
uninformed
as well,lendingmorecredencetothe
behinda. illiteracy is influential
are thesame variablesthatstood
votermodel.Othervariablesthatare influential
coefin Table 4. The statistically
outas beingstatistically
insignificant
significant
butalso small.
ficients
are imprecise,
Analysis
Sensitivity
We reporttheresultsfroma setof stresstestswe haveconductedin orderto invesmade thusfar.Althoughthe
of theinferences
tigatetherobustness(or fragility)
(implyingthe absenceof
dependentvariableIn(a) passed the testof normality
based on minimizthemodelsusinga robustestimator
outliers)we re-estimated
aregivensmallerweights
wherelargeoutliers
sumofsquarederrors,
inga weighted
and
theresultsare qualitatively
Not surprisingly,
accordingto Tukey'scriterion.
similar.These are reportedin Table 6.
quantitatively
a weightedregression
were estimated,we performed
Since the a parameters
withweightsinversely
to thesquaresof thestandarderrors.Thatis,
proportional
abouttheestiwe estimated
a simpleheteroskedastic
usinginformation
regression
matedvarianceof ln(a).66 These resultsare reportedin thelast two columnsof
Table 7. Thereare some notabledifferences.
on illiteracy is no
The coefficient
checks norBinary
andhas theoppositesign.Neither
estimated,
longeras precisely
checks are statistically
different
fromzero. However,allhouse is
significantly
nowstatistically
andpoliticallysignificant,
ourinference
aboutdivided
preserving
whichwas based on checks and BinarycHECKS.
government
Finally,esimilarity
is positiveand statistically
These resultdeserveexplaining.
significant.
The fl'saremoretightly
estimated
fordevelopedcountries
(in partbecausetheir
theheteroskedastic
samplesizes are larger),and therefore
regressions
putgreater
weightson developedcountries.Since theirpopulationshave highliteracyrates,
illiteracy has low variancein thesubsampleof developedcountries,
and loses
its statistical
The coefficients
on checks and BinarycHECKS
are not
significance.
forthe same reason.However,allhouse has considerablevariance
significant
in thesubsample,whichenablesa morepreciseestimation
of its influence.
The
estimateimpliesthat,all else equal, ifthepartyof theexecutivealso controlsthe
House (allhouse = 1) thena is 65.1 percentlowerthanif government
were
to whatwe imagined,ideologicalsimpoliticallyundivided(Model 1). Contrary
has
ilaritybetweenthe executiveand the leadingpoliticalpartyin government
66. The standarderrorsof ln(a) werecomputedusingthedelta method,presuming
thattheonly
sourceof erroris measurement
error.
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WhatGovernments
Maximizeand Why 523
theconverseeffect,at least in developedcountries.If theexecutiveand largest
are ideologicallysimilar(esimilarity = 1) thena is 92.8
partyin thelegislature
has
percenthigherthanotherwise.It appearsthatpoliticallydividedgovernment
forthebehaviorof governments
thanideologicaldiviimplications
verydifferent
whileideosions.67Politicaldivisionproducesoutcomesthatare welfare-oriented
in
logicaldivisionis adversarial.We notethatthetwo variablesare uncorrelated
thedata.
TABLE5. Beta coefficients
Theory
HI
HI. 2
H1.2
H2
H2
H3
H4
H5
H5
H6
H6
H7
H7
EC:
EC:
EC:
EC:
EC:
EC:
EC:
LB:
LB:
LB:
LB:
LB:
LB:
versusplurality
Proportional
versusplurality
Proportional
versusplurality
Proportional
Uninformed
voting
Uninformed
voting
to party
Ideologicalattachment
of mediaspending
Productivity
Executivecheckson legislators
Executivecheckson legislators
Executiveelectoralcompetition
Executiveelectoralcompetition
Undividedgovernment
Undividedgovernment
Variable
OLS1
OLS2
proportional
prop+legcohesion
plur+legcohesion
illiteracy
urbanization
lrdivide
tvadvertising_gdp
checks
BinarycHECKS
eiec
beiec
allhouse
esimilarity
0.01
0.21
0.21
-0.33
0.57
-0.24
0.23
0.22
-0.03
0.14
0.05
-0.44
0.47
-0.22
0.22
-0.24
-0.10
0.09
0.24
-0.32
-0.12
0.13
variable
onstandardized
ofthestandardized
areregression
coefficients
Notes:Betacoefficients
explanadependent
toryvariables.
In a widelycitedpaper,Levine and Renelt68critiquedtheempiricalliterature
A
on economicgrowthforproducingwhatturnoutto be quitefragileinferences.
are (conditional)correlain cross-country
rootcause of thefragility
regressions
ofregrescombination
variables.As a result,a particular
tionsamongtheregressor
coefficienton a variable,but other
sors may yield a strikingand significant
sencombinations
mayfailto comeup withanyresultof note.The Levine-Renelt
of
and
a
focus
variable
a
of
consists
regressors
group
choosing
sitivityanalysis
as thereare
as manyregressions
and estimating
thatarerelevantto theregression,
thereare 2k possiblesubsets).The
subsetsof thoseregressors
(withk regressors
estimateson theissue variablefromtheseregreshighestand lowestcoefficient
leads to betterwelfare,while
conclusionthatundividedgovernment
67. The Lohmann-O'Halloran
allhouse andchecks, is validated
notvalidatedbythemeasuresofpoliticallyundividedgovernment
esimilarity.
bv themeasureof ideologicallyundividedgovernment,
68. Levineand Renelt1992.
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524 International
Organization
If themaximumand minimum
have thesame sign(and are
sionsis thenreported.
aboutthevariableis robustto thechoice
theninference
statistically
significant),
of regressors.
We performa similarexercisebut use a softerstickto judge the
results.The resultsare reportedin Table 8.
TABLE6. Robust(to Outliers)regressions
Dependentvariable:ln(a)
Model 1
HI
HI. 2
H1.2
H2
H2
H3
H4
0.052
[0.14]
+ LEGCOHESION
1.314
PROP
[1.83]*
PLUR+ LEGCOHESION 1.299
[1.63]
- 3.299
illiteracy
[2.75]***
3.257
urbanization
[3.15]***
-0.656
lrdivide
[1.81]*
proportional
TVADVERTISING_GDP
H5
checks
H5
BinarycHECKS
H6
eiec
H6
beiec
H7
allhouse
H7
esimilarity
Constant
AT
AdjustedR2
0.17
[1.38]
0.152
[1.96]*
-0.328
[2.17]**
-0.276
[0.76]
0.228
[0.64]
0.788
[0.59]
50
0.69
Model 2
- 0.172
[0.48]
0.968
[1.41]
0.375
[0.49]
-4.045
[3.36]***
3.182
[3.28]***
-0.689
[1.98]*
0.19
[1.61]
1.927
[2.43]**
-1.534
[3.30]***
-0.28
[0.87]
0.503
[1.45]
0.706
[0.77]
50
0.75
in parentheses:
Note:Absolute/-statistics
at 10%; ** at 5%; and *** at 1%
♦denotesstatistical
significance
relatedto residuals.
withweightsinversely
Weightedregressions,
Consider the issue variable proportional, and the eightotherregressorsillitCHECKS,EIEC, ALLHOUSE,
LRDIVIDE,TVADVERTISING_GDP,
eracy, URBANIZATION,
and esimilarity.Fromtheseeightwe choose the212 combinations
comprising
variables(28), threeregrestworegressor
variable(8 combinations),
one regressor
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WhatGovernments
Maximizeand Why 525
TABLE7. Weighted
withdependentvariable:ln(a)
regressions
OLS
Variables
HI
proportional
H1.2
prop+legcohesion
HI. 2
plur+legcohesion
H2
illiteracy
H2
urbanization
H3
lrdivide
H4
tvadvertising_gdp
H5
checks
H5
BinarycHECKS
H6
eiec
H6
beiec
H7
allhouse
H7
esimilarity
Model 1
Model 2
Model 1
Model 2
0.037
[0.11]
1.46
[2.71]***
1.376
[2.55]**
- 2.759
[2.76]***
3.821
[3.79]***
-0.746
[2.20]**
0.214
[1.65]
0.153
[3.24]***
-0.102
[0.32]
0.99
[1.90]*
0.338
[0.62]
-3.665
[3.52]***
3.175
[3.89]***
-0.688
[2.19]**
0.211
[1.75]*
-0.01
[0.03]
0.941
[1.47]
1.448
[1.39]
1.903
[1.24]
2.961
[2.45]**
-0.418
[1.57]
0.183
[1.93]*
-0.015
[0.17]
-0.032
[0.11]
0.522
[1.01]
1.039
[1.21]
1.824
[1.39]
1.619
[1.57]
-0.38
[1.89]*
0.229
[3.00]***
-0.368
[3.60]***
Constant
N
AdjustedR2
OLS
Weighted
-0.296
[1.03]
0.326
[0.99]
0.537
[0.59]
50
0.67
1.809
[3.88]***
-1.576
[3.61]***
-0.369
[1.31]
0.496
[1.65]
0.68
[0.90]
50
0.72
-0.86
[2.66]**
-0.651
[2.58]**
0.928
[2.75]***
5.04
[1.99]*
50
0.53
-1.457
[0.98]
-2.128
[5.38]***
-0.708
[3.52]***
1.072
[3.92]***
1.887
[2.14]**
50
0.69
* denotesstatistical
in parentheses:
at 10%; ** at 5%; and *** at 1%. First
Notes:Absolute/-statistics
significance
leastsquares(OLS) estimatesfromTable4. WeightedOLS estimatesuse theinverseofthe
twocolumnsareordinary
varianceof In(a) as weights.
sor variables(56), and fourregressorvariables(70).69We conducttwo typesof
TYPE A Robustness,
is a softtestaskingwhether
robustness
checks.The first,
any
combinations
amongtheone-,two-,three-,or four-variable
producesmaximum
estimateson proportional so thatbothhave the same sign and
and minimum
at 10 percent.We concludethatproportional
bothare statistically
significant
at all. This maynotcome as a surprise
does notproduceany robustinferences
to
69. More thanfourcould be chosen,butthe212 combinations
providea fairidea of robustness
prop+ legcohesion and plur + legcohesion areincludedin everyregression.
choiceofregressors.
This content downloaded from 68.55.186.28 on Thu, 12 Sep 2013 11:05:28 AM
All use subject to JSTOR Terms and Conditions
526 International
Organization
thelow levelofprecisionwithwhichitwas estimated
in thefirst
considering
place.
But do thecoefficients
thatwereestimatedwithstatistical
holdup to
significance
theTypeA robustness
check?illiteracy, urbanization, tvadvertising_gdp,
and eiec.
and beiec do. To someextent,so do lrdivide, checks, BinarycHECKS,
withany threeor fourof the
For example,lrdivide producesrobustinferences
eightregressors.
TABLE8. Sensitivity
bounds
analysis:extreme
TYPE B robustness
TYPE A robustness
Variable
Robust bounds exist?
Estimates
HI
proportional
No
high
base
low
H2
illiteracy
Yes
All combinations
high
base
low
H2
urbanization
Yes
All combinations
high
base
low
H3
lrdivide
high
base
low
H4
tvadvert_gdp
Yes
3 or 4 variable
combos
Yes
All combinations
H5
checks
H5
high
base
low
BinarycHECKS
H6
eiec
H6
beiec
Yes
3 or 4 variable
combos
Yes
2, 3 or 4 variable
combos
Yes
2, 3 or 4 variable
combos
Yes
All combinations
H7
allhouse
No
H7
esimilarity
high
base
low
No
high
base
low
high
base
low
high
base
low
high
base
low
high
base
low
-0.173
0.037
0.634
-1.963
-2.759
-6.962
6.311
3.821
2.692
0.435
-0.746
-0.818
0.685
0.214
0.204
0.176
0.153
-0.092
2.152
1.809
-0.971
0.037
-0.368
-0.374
-0.856
-1.576
-1.767
0.074
-0.296
-0.650
0.537
0.326
-0.176
Robust?
t-value
Influentialregressors
0.445
0.110
1.068
-1.647
2.760
-6.296
8.555
3.788
2.899
0.811
2.199
-2.155
6.164
1.655
1.646
2.696
3.244
-0.763
2.468
3.876
-0.766
0.153
3.602
-2.335
-1.098
3.614
-3.287
0.195
1.030
-1.162
1.496
0.991
-0.462
illiteracy
No
none
Robust
none
Robust
illiteracy,
urbanization
Robust
none
Robust
illiteracy,
urbanization
No
No
tvadvertising_gdp
illiteracy,
urbanization,
tvadvertising_gdp
No
illiteracy,
urbanization
No
illiteracy,
tvadvertising_gdp
No
Robust,but
weakly
Note:The base estimatesare fromthefirstcolumnof OLS estimates(beiec and BinarycHECKS
fromthesecond)of
Table 4. The "high"and "low" values are estimatedas themax and minof theset of estimatesusingall possible
combinations
of 1, 2, 3, and 4 regressors
(=212 runs).TYPE A Robustnessindicatesintervals(with1, 2, 3, or 4
notcontaining
at 10%. TYPE B Robustness
regressors,
zero,withbothboundsstatistically
respectively)
significant
indicatesthepresenceor absenceof robustintervalsacrossthe(212) setsof estimatesforanyissue variable.
TypeB Robustnessindicateswhethertheintervalforeach issue variableconstructed
fromthefullsetof212 regressor
combinations
containszero(andis there-
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All use subject to JSTOR Terms and Conditions
WhatGovernments
Maximizeand Why 527
forenotrobust).Sincetheboundsforilliteracy arebothnegativeandstatistically
aboutthefraction
ofuninformed
we concludethattheinference
voters
significant,
is strongly
robusttochoiceofregressors.
Thus,illiteracy, urbanization, tvadvertising_gdp,and beiec providerobustTypeB inferences,
lrdivide, checks,
in whichone of the boundshas an
checks, and eiec provideinferences
Binary
absolutet value less than1.6, and is therefore
poorlymeasured.The inferences
arenotas robustto thechoiceofregressors.
we havemadefromthosecoefficients
the inferThe adjacentcolumnindicatesvariableswhose inclusionundermines
ences froman issue variable.It appearsthatinclusionof the variablesilliteracy, urbanization, and tvadvertising_gdpweakentheabilityof manyother
These variablesobviouslycapinferences.
variablesto provideclearindependent
in theissue variables,so thatthepartialcorinherent
turea numberof influences
relationof theissue variableswiththedependentvariableIn(a) is loweredonce
theyare included.A lessonfromthisexerciseis thatitis possibleto generatea set
butif empiricalresultsare to move theory
of resultsfroma specificregression,
robustness.Thus, our earlierinferencesabout
forward,theymustdemonstrate
of media),and H6 (execuH2 (uninformed
voting),H4 (productivity
hypotheses
are robust,whilethoseaboutH3 (ideologicalattachtiveelectoralcompetition)
is to
ment)and H5 (executivechecks)are fragile.The way forwardempirically
andexecutivechecks.Another
bettermeasuresofideologicalattachment
construct
is to increasethesampleto testthesetheories,whichrequirestrade,protection,
and outputdata formorecountries.
of tariffs
to
In a finalsetof robustness
checks,we allow forotherdeterminants
affectourestimatesof a. In thesecondsectionwe fullyembracetheGH94 setup
maximizea weightedsumof specialinterest
wheregovernments
moneyand pubalso care about
lic welfare.But Rawlsianlogic would predictthatgovernments
a fairlivingstandardforall, especiallylowerincomeworkers.We
maintaining
thesetypesofconsiderations
to introduce
byestimating
equation(10) using
attempt
we
threedifferent
typesof additionalcontrolvariables.In thefirstspecification
i at timet). In a secondspecification
introduced
averageworkerwage (in industry
we introduced
(measured
averageworkerwage plus averageworkerproductivity
as outputperworker),and in a thirdmodelwe addedaverageworkerwage scaled
percapitaincome.Estimatesof thea's fromthesethreemodels
by thecountry's
are availableuponrequest.For mostcountriestheadditionalregressors
pushthe
for
The U.S. estimate, example,
estimatesof a downward,sometimesstrikingly.
declinesfromabove 26 to less than7, and similardeclinesare seen in a number
of developedcountries.The additionof theRawlsianregressorssuggeststhatif
used to protectworkerincomesis separatedfromtheportion
theportionof tariffs
thencountriesare shown
thatrespondsto specialinterest
of tariffs
contributions,
This is notalwaysthecase, and
to be muchmoreresponsiveto specialinterests.
thea's forNepal,Bangladesh,Malawi,Cameroon,Costa Rica, and Indiaactually
increaseas a resultof theadditionalvariables.
of a change?The uninformed
voters
Do our inferenceson the determinants
of media
and theproductivity
theideologicalattachment
hypothesis,
hypothesis,
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528 International
Organization
withall threesetsofnewa's. However,
continue
tobe affirmed
spending
hypothesis
checks andBinarycHECKS
about
mayno longerbe usedto supportthehypothesis
executiveelectoralcompetition
andeiec andbeiec
(oraboutdividedgovernment),
The legislano longersupportthehypothesis
of executiveelectoralcompetition.
tive bargainingmodel faces empiricalrejectionif theseare the correcta's. We
to equation(10) to
should,however,be remindedthataddingad hoc regressors
estimatethenewa's is atheoretical.
One couldimaginea modelwherea is deterwhich
minedby theinteraction
of Rawlsianmotiveswithlegislativebargaining,
wouldexplainwhythelegislativebargaining
variablesare no longerstatistically
a's. The idea of
once we controlforRawlsianmotiveswhenestimating
significant
structural
estimation
estimation,
espousedin thispaperemphasizestheory-based
hereshouldbe consideredad hoc. The
whereastheresultsfromtheestimations
and suggestthatworkon thetheonewestimatesofa arenevertheless
interesting,
variableslikewage andproductivreticalfoundations
thatmayadmitexplanatory
ityin equation(10) shouldproveworthwhile.
differences
in inferencesabout government's
Finally,thereare noteworthy
data as thedepenwelfare-mindedness
thatmaybe made (indirectly)
usingtariff
dentvariable,and(directly)
ofa as we havedone.Usingtheimportusingestimates
as thedependentvariablein place of In(a) yieldestimatesthat
weightedtariffs
andthemodelofexecutivechecks
theuninformed
votershypothesis
weaklysupport
and balances(or dividedgovernment
to theextentthatchecks measuresit),but
no others.Giventhesedifferences,
we strongly
preferto use ourmethod.It is the
moredirectand theoretically
relevantmethodforassessingthefundamental
questionof whygovernments
behaveas theydo.
Conclusion
This articlehas studiedquantitatively
the welfare-mindedness
of governments
thelens of tradepolicydetermination.
Our analysissuggestsa substanthrough
tial variationin government
behaviorin a cross-section
of developedand developingcountries.The variationbroadlymatchesour a prioribeliefsof theweight
governments
puton social welfarerelativeto industry
lobbyingwhentakingpolwiththeperception
indexof corruption
of
icy decisions.Theyare also consistent
International.
Transparency
More importantly,
thedeterminants
of thisvariationweretheoretically
motiwiththeone used to estimatewelfare-mindedness
vated,usingmodelsconsistent
of governments.
These theoriessuggestspecificpolitical,economic,and institutionalvariablesas fundamental
determinants
ofthevariation
inthebehaviors
ofgovernments.
we empirically
testwhether
Usinga newdatabaseon politicalinstitutions
thesevariablesinfluence
thewelfare-mindedness
ofgovernments
as thetheories
predict.The resultssuggestthattheydo. The mostnotablefindings
arethefollowing.
Politicalinstitutions
thathave a largernumberof checksand balancesembedded
inthedecision-making
The more
processcause morewelfare-minded
governments.
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WhatGovernments
Maximizeand Why 529
informed
are voters,as measuredby literacyand thedegreeof urbanization,
the
is theweightthatgovernments
puton thewelfareoftheirpolitywhenmakgreater
attachedarevoterstoparingtradepolicydecisions.Finally,themoreideologically
ofthemediain influencing
theproductivity
uninformed
tiesandthegreater
voters,
theless weightgovernments
puton social welfarewhenmakingtradepolicy.
These resultsare,to thebestof ourknowledge,thefirstones thatare derived
We have hintedat othersthatare potentially
testable.
froman underlying
theory.
forunderstanding
and advocatingpolicy.We
Such researchcan proveimportant
of thisstudyto pusha setof straitjacketed
cautionagainstusingthefindings
polconsensus(WC). As countriesgrowricher,
icies in the styleof theWashington
It is best to direct
theirpolitieswill be empoweredto changetheirinstitutions.
butat activitiesthatcreaid notat institutional
changein a country,
development
on theinstitutional
lacunaethecountry
faces.
conditional
ategrowthopportunities
ExperiencewiththeWC policieshavefailedto showanyevidenceof institutional
in permanently
aid has beeneffective
raisingincomes.
change,whileactivity-based
determinants
of welfareThus,ourresultsthatchecksand balancesare important
mindedness
a, shouldnotbe takento suggestthataid by richcountries
parameter
to changetheirjudicial system.Likewise,ourresult
be used to pushgovernments
ofa does notsuggestthataid should
determinant
is an important
thaturbanization
Those changesneedto be theoutcomeof complexendogpushforurbanization.
and international
enousprocesses,thatgovernments
agencieswithlimitedinformationand resourcessimplycannotmakehappen.Institutional
changeis bestleft
to endogenousprocesses,as thefailureof WC-stylepoliciesdemonstrates.70
is themotivefortradeliberalizaFinally,if an increasein welfare-mindedness
institutional
tion,thentheresultsin thisarticlesuggestthatit is in fundamental
episodesacrosstheworldmaybe
changethatthesourceof recentliberalization
serveto indicatewhichcounfound.The observablefundamentals
(ourregressors)
one
triesmightbe preparedto liberalize.Countriesthathave succeededin altering
or moreofthesefundamentals
maybe readyto takethesteptowardliberalization.
incentivesand designthatminimizepoliticaland
Perhaps,withthe appropriate
liberalization
could be convincedto undertake
economicrisks,theirgovernments
thatare politicallysustainable.
programs
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