CIS
Center for Comparative and International Studies
IED
Institute for Environmental Decisions
ETH Zurich
IFW, Haldeneggsteig 4
8092 Zurich, Switzerland
Prof. Dr. Thomas Bernauer
[email protected]
Prof. Dr. Vally Koubi
[email protected]
Dr. Tobias Böhmelt
Political Economy
MACIS Core Course – Spring Term 2015
Faculty: Thomas Bernauer and Vally Koubi
Time and place: Thursdays from 9:15am to 12:00pm; IFW C.33
Credits: 8 ECTS credit points (about 240h workload in total)
First meeting: February 26, 2015
Aims and Scope
This course emphasizes the interplay of political and economic forces in shaping policy
outcomes at local, national, or global levels. To this end, it focuses on the application of
economic models to political questions, and studies the influence of political processes and
institutions on economic activity. The course draws on a wide range of theoretical
perspectives from comparative and international politics, positive political theory, public
choice, and economics. These different theoretical perspectives and models from political
science and economics will be used to investigate a number of specific areas of interest:
e.g., the effects of special interests on government regulation of economic activity, the
determinants of government spending, the determinants of economic growth and sustainable
development, the politics of international trade and investment, monetary and fiscal policy,
the welfare state, and globalization. Ultimately, this course not only seeks to make students
familiar with the theoretical and methodological approaches used in these areas of study,
but also with important research topics in comparative and international political economy.
Procedural Issues and Grading
Procedural issues: students who did not attend courses in economic policy or political
economy so far should read these two books before the course begins:
•
Oatley, Thomas. 2010. International Political Economy: Interests and Institutions in
the Global Economy. New York: Longman.
•
Spero, Joan E., and Jeffrey A. Hart. 2005. The Politics of International Economic
Relations. London: Wadsworth.
Grading in general: the overall grade is composed of two equally weighed components. The
first component consists of an essay and the student’s corresponding presentation (50% of
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overall grade). Second, there is a written exam at end of the term, which takes place on May
28, 2015 from 10:15am to 12:00pm (50% of overall grade).
Essay: besides her/his mandatory reading and active participation in class, each student has to
write one essay on an assigned paper and will also present this assigned paper in class. As of
February 26, there will be about two student presentations of around 10 minutes each, followed
by ca. 10 minutes of Q&A in each session. The essay (max. 2,500 words, all inclusive, 1.5 line
spacing) must contain a title page (see MACIS template), a summary of the assigned paper’s
theoretical and empirical content (ca. 1.5 pages), followed by a discussion of the paper’s
strengths and weaknesses (ca. 1.5 pages), a section that outlines possibilities for further research
on this topic (ca. 1 page), and the list of references. The essay must be handed in 24 hours before
the presentation takes place (i.e., Wednesday morning by 9:15am) via email to both Thomas
Bernauer and Vally Koubi. Submissions after the deadline will automatically receive grade 1 on
the 1–6 scale. Essays that do not meet the formal requirements (see above) will not be graded.
The presentation and the essay will receive separate grades, while the average will account for
50% of the overall grade of the course (see above).
End of semester exam: the written exam will cover all mandatory reading assignments and
the contents of the discussion in the classroom. Thus, it will cover the papers assigned
specifically for the student essays and presentations only in terms of what has been dealt
with in the classroom. You do not have to read the papers assigned for student presentations
(except if the respective paper has been assigned to you personally for that purpose).
Schedule
(Reading assignments are listed further below)
Date
19 Feb 2015
26 Feb 2015
5 March 2015
12 March
2015
19 March
2015
26 March
2015
2 April 2015
9 April 2015
16 April 2015
23 April 2015
30 April 2015
7 May 2015
14 May 2015
Topic
No class (TB and VK attend ISA conference in USA)
Topic 1: Introduction to (International) Political
Economy; Perspectives on Comparative and
International Political Economy
Topic 2: Government Spending
Topic 3: Political Determinants of Economic Growth
Faculty
Topic 4: Sustainable Development
Thomas
Bernauer
Thomas
Bernauer
Thomas
Bernauer
Topic 5: International Trade, Macro Issues
Topic 6: International Trade, Micro Issues
Easter Break
Topic 7: MNCs, FDI, and Internationalization of
Production
Topic 8: The International Monetary System
Topic 9: International Financial Markets
Topic 10: The Welfare State
Public Holiday
Thomas
Bernauer
Vally Koubi
Vally Koubi
Vally Koubi
Vally Koubi
Vally Koubi
Vally Koubi
3
21 May 2015
Topic 11: Global Environmental Politics
28 May 2015
Final Exam
Thomas
Bernauer
Thomas
Bernauer
Vally Koubi
Topic 1: Introduction to (International) Political Economy; Perspectives on
Comparative and International Political Economy
The first session will provide an overview of the class and will make students familiar with
its requirements. We will discuss what Political Economy and International Political
Economy are and deal with. We will also discuss three general theoretical perspectives or
“schools of thought” that are usually employed in (International) Political Economy.
If (and only if) you have carefully read and understood the Oatley textbook (see above),
you can skip the following two texts (if not, you must read them):
•
Drazen, Allan. 2000. Political Economy in Macroeconomics. Princeton, NJ: Princeton
University Press (pp. 3–17).
•
Frieden, Jeffrey A., David A. Lake, and J. Lawrence Broz. 2010. International
Political Economy: Perspectives on Global Power and Wealth. New York: W.W.
Norton (pp. 1–16).
The growing number of countries, other actors (such as intergovernmental organizations,
non–governmental organizations, and multinational corporations (MNCs)), and the advent
of new technologies and ideologies have altered the international economic and political
system – and the relationships among and between international and transnational actors.
Interdependence and globalization have a major impact on the forms and degrees of
cooperation between different actors: while the probability of rational, perhaps selfish
behavior may have increased, new opportunities for collaboration in the provision of public
goods (peace, environmental quality, a stable international monetary system, etc.) have also
opened up. Interdependence and globalization may thus raise the potential benefits of non–
cooperation, but could simultaneously reward good behavior and also encourage the
creation of international institutions and organizations.
The three general theoretical perspectives in international and comparative political
economy for explaining these patterns, i.e., Liberalism, Marxism, and Nationalism
(Realism), are composed of both analytical and normative elements. For example, economic
liberalism is an analytic tool based on the theories and assumptions of neoclassical
economics (rational maximization of individual self–interest, efficiency, etc.), and it is
normatively committed to a market /capitalist economy. The analytic element of economic
nationalism pre–supposes an anarchic nature of the international system and recognizes the
primacy of the state and its interests in international affairs. By discussing the nature and
desirability of markets and their reliance on state institutions, the three perspectives
implicitly advocate various social and political objectives. Consequently, they propose
different policies for social, economic, and industrial development, international trade and
finance, national security, etc.
Most international political economists consider the socio–economic development of least–
developed countries (LDCs) as one of the most pressing problems. Liberals believe that the
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problem emanates from objective economic factors and/or misguided policies of poor
countries themselves. Others (e.g., dependency theorists) claim that the functioning of the
world market (division of labor, terms of trade, or global economic policy institutions) and
the practices of capitalism are the primary causes of LDCs’ problems. As a result, decisions
on whether economic integration (global, regional) or dissociation from the world economy
(autarchy, self–reliance, import substitution policies, etc.) is the best route to economic
development are dependent on beliefs about the causes of existing problems. We will be
covering the three main perspectives, using articles that reflect each school of thought.
• Liberman, Peter. 1996. Trading With the Enemy: Security and Relative Economic Gains.
International Security.
• Reuveny, Rafael, and William R. Thompson. 2008. Uneven Economic Growth and the
World Economy’s North–South Stratification. International Studies Quarterly.
• Simmons, Beth, and Zachary Elkins. 2004. The Globalization of Liberalization: Policy
Diffusion in the International Political Economy. American Political Science Review.
Student presentations:
• Based on your reading of newspapers, blogs, etc., outline the two biggest economic
problems your home country is currently facing. Based on your knowledge of Political
Economy, explain why it could be difficult to solve them and sketch potential solutions to
these problems. This assignment, for which two students can enlist, differs from the
standard assignments for the student essays and presentations, starting with Topic 2.
Topic 2: Government Spending
This session will deal with government spending and discusses their theoretical arguments
and empirical applications. According to the classical theory of the democratic state,
governments exist and grow in order to provide public goods, eliminate or alleviate
externalities, redistribute income and wealth, and provide services to special interest
groups. The state, in other words, exists in order to carry out the “will of the people” and
state policies thus reflect the preferences of individual voters. In contrast, according to the
“state–over–citizen view,” governments grow, because it is in the interest of government
bodies to expand their size beyond the level demanded by citizens. The government as a
whole (Leviathan theory) or individual government agencies (bureaucratic theory) occupy a
monopoly position in a society. Hence, they are in a position to select the quantity and
types of services they will provide, mostly based on their own preferences and objectives.
•
Mueller, Dennis C. 2003. The Size of Government. In Dennis C. Mueller. Public Choice
III. Cambridge: Cambridge University Press: 501-534.
•
Persson, Torsten and Guido Tabellini. 2004. Constitutional Rules and Fiscal Policy
Outcomes. American Economic Review 94(1):2 5-46
•
Bernauer, Thomas and Vally Koubi. 2013. Government Size and Environmental Quality.
Public Choice 156(3-4): 503-609.
Student presentations:
•
Bawn, Kathleen, and Frances Rosenbluth. 2006. Short versus Long Coalitions: Electoral
Accountability and the Size of the Public Sector. American Journal of Political Science 50
(2): 251–265.
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Lindqvist, Erik and Robert Östling. 2010. Political Polarization and the Size of
Government. American Political Science Review 104(3): 543-565.
•
Topic 3: Political Determinants of Economic Growth
Most political economists postulate that economic growth is mainly determined by the
accumulation of physical and human capital or technological progress. It is also claimed to
depend on institutions and in particular on the type of political system (democracy,
autocracy, etc.), the form of democratic government (presidential versus parliamentary), the
type of the electoral system (plurality versus proportional representation), the rent-seeking
behaviour of politicians or lobbying behavior by interest groups, the extent of corruption,
governmental regulations and economic policies, political stability, wars, and other factors.
We will discuss the theoretical arguments for such determinants of economic growth and
examine their empirical relevance.
•
Acemoglu, Daron and James Robinson. 2008. The Role of Institutions in Growth and
Development. The World Bank, Working Paper No.10.
•
Glaeser, Edward L., Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer.
2004. Do Institutions Cause Growth? Journal of Economic Growth 9(3): 271-303.
•
Persson, Torstein and Guido Tabellini. 2006 . Democracy and Development: The Devil in
the Details. American Economic Review 96(2): 319-324.
Student presentations:
•
Knutsen, Carl Henrik. 2011. Which Democracies Prosper? Electoral Rules, Form of
Government, and Economic Growth. Electoral Studies 30 (1): 83–90.
•
Plümper, Thomas, and Christian W. Martin. 2003. Democracy, Government Spending, and
Economic Growth: A Political–Economic Explanation of the Barro–Effect. Public Choice
117 (1–2): 27–50. In combination with: Barro, Robert J. 1996. Democracy and Growth.
Journal of Economic Growth 1 (1): 1–27.
Topic 4: Sustainable Development
Economic growth and socio-economic development affect the natural environment (and
vice versa). What are the conditions under which sustainable (i.e., ecologically benign)
development is possible? Economists emphasize the effects of economic factors such as the
level of income, the scale and type of economic activity, and trade openness on
environmental quality. But it seems that political factors and in particular the type of the
political system play a significant role as well. Moreover, several authors advance
competing propositions with regard to the effects of democratic governments on public
goods provision. We will discuss such arguments and the empirical evidence.
•
•
•
Konstanza, Robert. 2014. Time to Leave GDP Behind. Nature.
Dasgupta, Susmita, Benoit Laplante, Hua Wang, and David Wheeler. 2002.
Confronting the Environmental Kuznets Curve. Journal of Economic Perspectives.
Bernauer, Thomas, and Vally Koubi. 2009. Effects of Political Institutions on Air
Quality. Ecological Economics.
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•
Bättig, Michèle, and Thomas Bernauer. 2009. National Institutions and Global
Public Goods: Are Democracies More Cooperative in Climate Change Policy?
International Organization.
Student presentations:
•
De Soysa, Indra, and Eric Neumayer. 2005. False Prophet or Genuine Savior?
Assessing the Effects of Economic Openness on Sustainable Development, 1980–99.
International Organization.
•
Spilker, Gabriele. 2011. Helpful Organizations: Membership in Inter–Governmental
Organizations and Environmental Quality in Developing Countries. British Journal of
Political Science.
Topic 5: International Trade - macro level issues
Trade is probably the oldest and most important form of economic exchange between nations and
their citizens and firms, and it has expanded over the past centuries, as societies generally seek to
acquire goods not readily available at home. The effect of trade on international politics – and
vice versa – is a subject of controversy, though. On one hand, liberals consider trade as a force
for peace, because it promotes harmony of interest among societies and gives states a stake in the
preservation of the status quo. Economic nationalists and protectionists, on the other hand, view
trade as a source of political tensions and economic leverage, since economic specialization
makes states insecure, dependent, and vulnerable to external developments. This may lead to
economic protectionism and state control over international trade. Until the early 1970s, the
history of the postwar trading system was one of increasing liberalization with a strong reduction
of trade barriers. Since then, however, economic nationalism has arguably become a potent force
in global trade relations again due to of several changes, e.g., the shift to a floating exchange rate
system, the relative decline of the American economic hegemony, or the expansion of the EU. In
this session, we will be focusing on institutional issues, e.g., the dynamics of international trade
disputes.
• Dorussen, Han, and Hugh Ward. 2010. Trade Networks and the Kantian Peace.
Journal of Peace Research.
• Bown, Chad, and Reynolds, Kara. 2014. Trade Flows and Trade Disputes. Paper
presented at the 2014 PEIO conference.
• Sattler, Thomas, and Thomas Bernauer. 2010. Gravitation or Discrimination?
Determinants of Litigation in the World Trade Organization. European Journal of
Political Research.
Student presentations:
• Goldstein, Judith L., Douglas Rivers, and Michael Tomz. 2007. Institutions in
International Relations: Understanding the Effects of the GATT and the WTO on
World Trade. International Organization.
• Baccini, Leonardo, and Andreas Dür. 2012. The New Regionalism and Policy
Interdependency. British Journal of Political Science.
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Topic 6: International Trade - micro level issues
International trade has important economic and social implications for people, and people’s
attitudes concerning international trade have important implications for trade policy. We
will thus study the determinants of individual attitudes towards international trade.
•
Kono, Daniel Y. 2008. Does public opinion affect trade policy? Business and
Politics 10(2).
•
Mansfield, Edward D. and Diana C Mutz. 2009. Support for Free Trade: SelfInterest, Sociotropic Politics, and Out-Group Anxiety. International Organization
63(03): 1–34.
•
Nguyen, Quynh and Thomas Bernauer. 2014. Does Social Trust increase Support for
Free Trade? Evidence from a Field Survey Experiment in Vietnam. CIS Manuscript.
Student presentations:
•
Hainmueller, Jens and Michael J Hiscox. 2006. Learning to love globalization:
Education and individual attitudes toward international trade. International
Organization 60(02): 469–498.
•
Lü, Xiaobo, Kenneth F Scheve and Matthew J Slaughter. 2012. Inequity Aversion
and the International Distribution of Trade Protection. American Journal of Political
Science 56(3): 638–654.
•
Naoi, Megumi and Ikuo Kume. 2011. Explaining Mass Support for Agricultural
Protectionism: Evidence from a Survey Experiment During the Global Recession.
International Organization 65: 771–795.
Topic 7: MNCs, FDI, and Internationalization of Production
Arguably, multinational corporations (MNCs) belong to the most important types of non–
state actors that emerged over the last decades. The rapid growth of MNC activities can be
explained by changes in technology and organizational sophistication, government policies
that actively encourage their expansion, or the reduction of tariffs that make direct
investment more attractive. However, while the expansion of MNC activities has been
applauded, it has also been heavily criticized at the same time in both home and host
countries: MNC expansion not only affects the economic development of home/host
countries, but also domestic politics and the cultural and social wellbeing of least–
developed countries. For example, proponents argue that the expansion of MNCs serves
important national interests, such as access to foreign sources of raw material, and
contributes to the home country’s balance of payments. Furthermore, foreign direct
investment (FDI) from MNCs could fill resource gaps in developing counties and, thus,
improve the quality and efficiency of the factors of production. In contrast, opponents argue
that MNC expansion contributes to higher unemployment and de–industrialization in the
home country, and to the creation of a branch–plant economy incapable of propelling
overall development in the host countries.
•
Caves, Richard E. 2000. The Multinational Enterprise as an Economic Organization.
In: Jeffrey A. Frieden, David A. Lake, and J. Lawrence Broz. 2010. International
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Political Economy: Perspectives on Global Power and Wealth. New York: W.W.
Norton (pp. 157–168).
• Li, Quan, and Adam Resnick. 2003. Reversal of Fortunes: Democratic Institutions
and Foreign Direct Investment Inflows to Developing Countries. International
Organization 57(1): 175–211.
• Scheve, Kenneth and Matthew J. Slaughter. 2004. Economic Insecurity and the
Globalization of Production. American Journal of Political Science 48(4): 662–674.
Student presentations:
• Simmons, Beth, Zachary Elkins, and Andrew Guzman. 2006. Competing for Capital:
the Diffusion of Bilateral Investment Treaties, 1960–2000. International
Organization 60(4): 811–846.
• Büthe,Tim and Helen Milner. 2008. The Politics of Foreign Direct Investment into
Developing Countries: Increasing FDI through International Trade Agreements?
American Journal of Political Science 52(4): 741–762.
Topic 8: The International Monetary System
A well functioning monetary system is a backbone of the international economy because it
facilitates the growth of trade, foreign investment, and global interdependence. Thus, the
efficiency and stability of the international monetary system are major factors in the IPE.
Every state desires not only an efficient international monetary system but also one that
does not seriously harm its own interest. Moreover, even though every international
monetary regime rests on a particular political order, and it seems that domestic political
considerations, such as elections, and central bank independence have a significant impact
on governments’ monetary policy (for example, whether they defend their exchange rate
or not in times of crisis).
• If you have not carefully read the Oatley textbook: D’Arista, Jane. 2009. The Evolving
International Monetary System. Cambridge Journal of Economics 33: 633-652.
• Broz, J. Lawrence, and Jeffrey A. Frieden. 2001. The Political Economy of International
Monetary Relations. Annual Review of Political Science 4 (1): 317–343.
• William Bernhard, William and David Leblang. 1999. Democratic Institutions and
Exchange-rate Commitments. International Organization 53(1): 71 – 97.
• De Grauwe, Paul. 2011. The Governance of a Fragile Eurozone. CEPS Working
Document No. 346.
Student presentations:
• Sattler, Thomas, and Stefanie Walter. 2009. Globalization and Government Short–
term Room to Maneuver in Economic Policy: An Empirical Analysis of Reactions to
Currency Crises. World Political Science Review 5 (1): ISSN 1935–6226.
• Husain, Aasim M., Ashoka Mody, Kenneth S. Rogoff. 2005. Exchange Rate Regime
Durability and Performance in Developing versus Advanced Economies. Journal of
Monetary Economics 52: 35–64.
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Topic 9: International Financial Markets
Although internationalization/globalization of finance has become an important feature of
today’s global economy, the international financial system continues to be largely
nationally based and consists of closely interconnected, discrete financial systems. While
the international movement of capital can and, to some extend, has integrated economies
around the world, many countries retain controls on capital flows and behave according to
the “home bias” principle. Moreover, financial crises, a recurrent phenomenon in the
international system, can occur at the national, regional, and international levels. We will
examine the factors that contribute to and prevent financial crises.
• If you have not carefully read the Oatley textbook: Bordo, Michael, Barry Eichengreen,
Daniela Klingebiel, Maria Soledad Martinez-Peria and Andrew K. Rose. 2001. Is the
Crisis Problem Growing More Severe? Economic Policy 16(32): 53-82.
• Barkbu, Bergljot, Barry Eichengreen, and Ashoka Mody. 2012. Financial Crises and the
Multilateral Response: What the Historical Record Shows. Journal of International
Economics 88 (2) 422–435.
• Bernauer, Thomas, and Vally Koubi. 2006. On the Interconnectedness of Regulatory
Policy and Markets: Lessons from Banking. British Journal of Political Science 36 (2):
509–525.
• Bernauer, Thomas, and Vally Koubi. 2004. Banking Crisis vs. Credit Crunch? A Cross–
Country Comparison of Policy Responses to Dilemmas in Banking Regulation. Business
and Politics 6 (2): 1091.
Student presentations:
• Simmons, Beth. 2001. International Politics of Harmonization. The Case of Capital
Market Regulation. International Organization 55 (3): 589–620.
• Fratzscher, Marcel. 2012. Capital Flows, Push versus Pull Factors and the Global
Financial Crisis. Journal of International Economics 88: 341-345
Topic 10: The Welfare State
Most advanced higher–income democracies have developed and strong welfare states. In
this session, we will be focusing on the examination of the micro– and macro–level factors
that may promote, sustain, and challenge the welfare state.
•
Brooks, Clem, and Jeff Manza. 2006. Why do Welfare States Persist. Journal of Politics
42(2-3): 816-827.
•
Dion, Michelle L., and Vick Birchfield. 2010. Economic Development, Income
Inequality, and Preferences for Redistribution. International Studies Quarterly 54(2):
315-334.
•
Stefanie Walter. 2010. Globalization and the Welfare State: Testing the
Microfoundations of the Compensation Hypothesis. International Studies Quarterly
54: 403-426.
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Student presentations:
•
Rudra, Nita. 2002. Globalization and the Decline of the Welfare State in Less-Developed
Countries. International Organization 56(2): 411-445.
•
Iversen, Torben and Thomas R. Cusack. 2000. The Causes of Welfare State Expansion:
Deindustrialization or Globalization? World Politics 52(3): 313-349.
Topic 11: Global Environmental Politics
The expanding scope and severity of environmental problems associated with socio–
economic development has brought about large–scale political efforts to mitigate these
problems. Which factors shape states’ and their citizens’ willingness to contribute to
solutions to these problems? In this final substantive session we address this issue from a
macro and a micro-level perspective.
• Bernauer, Thomas. 2013. Climate Change Politics. Annual Review of Political
Science.
• Bernauer, Thomas, Anna Kalbhenn, Vally Koubi, and Gabriele Spilker. 2010. A
Comparison of International and Domestic Sources of Global Governance Dynamics.
British Journal of Political Science.
• Bernauer, Thomas, Gampfer, Robert. 2013. Effects of Civil Society Involvement on
Popular Legitimacy of Global Environmental Governance. Global Environmental
Change.
Student presentations:
• Ward, Hugh. 2006. International Linkages and Environmental Sustainability: The
Effectiveness of the Regime Network. Journal of Peace Research.
• Ward, Hugh, and Xun Cao. 2012. Domestic and International Influences on Green
Taxation. Comparative Political Studies.
End of Seminar: Final Exam – May 28, 2015 (10:15am – 12:00pm)