Research Program in Political Economy

In Gilligan and Krehbiel's models of procedural choice in legislatures, a committee exerts costly
effort to acquire private information about an unknown state of the world. Subsequent work on
expertise, delegation, and lobbying has largely followed this approach. In contrast, we develop a
model of information as policy valence. We use our model to analyze a procedural choice game,
focusing on the effect of transferability, i.e., the extent to which information acquired to implement one policy option can be used to implement a different policy option. We find that when information is transferable, as in Gilligan and Krehbiel's models, closed rules can induce committee specialization. However, when information is policy-specific, open rules are actually superior for inducing specialization. The reason for this surprising result is that a committee lacking formal agenda power has a greater incentive to exercise informal agenda power by exerting costly effort to generate high-valence legislation.

We analyze political campaigns between two parties with opposing interests. Parties
pay a cost to provide information to a voter who chooses the policy. The information flow
is continuous and stops when parties quit. The parties’ actions are strategic substitutes:
a party with a lower cost provides more but its opponent provides less information. For
voters, the parties’ actions are complements and raising the low-cost party’s cost may be
beneficial. Asymmetric information adds a signaling component in the form of a belief threshold
beyond which unfavorable information is offset by the informed party’s decision
to continue campaigning.

We argue that the political uncertainty generated by elections encourages private actors to delay
investments that entail high costs of reversal, creating a pre-election decline in economic activity
entitled a “reverse electoral business cycle.” This incentive for delay becomes greater as policy
differences between parties/candidates increase. Using new survey and observational data from
the United States, we test these arguments. The individual-level analysis assesses whether
respondents’ perceptions of presidential candidates’ policy differences increased the likelihood
of postponing certain actions and purchases. For one of these items, housing, we collected
observational data to examine whether electoral cycles indeed induce a pre-election decline in
economic activity. The findings support the predictions and cannot be explained by existing
theories of political business cycles.

Studies of OECD countries have generally failed to detect real economic expansions in the pre-election
period, casting doubt on the existence of opportunistic political business cycles. We develop a theory that
predicts a substantial portion of the economy experiences a real decline in the pre-election period.
Specifically, the political uncertainty created by elections induces private actors to postpone investments
with high costs of reversal. The resulting declines, referred to as reverse electoral business cycles, are
larger the more competitive the electoral race and the greater the polarization between major parties. We
test these predictions using quarterly data on private fixed investment in ten OECD countries between
1975 and 2006. The results suggest that reverse electoral business cycles exist, and as expected, depend
on electoral competitiveness and partisan polarization. Moreover, simply by removing private fixed
investment from gross domestic product (GDP), we uncover robust evidence of opportunistic cycles.

The development and elaboration of the spatial theory of voting has contributed greatly to the study of legislative decision making and elections. Statistical models that estimate the spatial locations of individual legislators have been a key contributor to this success (Poole and Rosenthal 1997; Clinton, Jackman and Rivers 2004). In addition to applications to the U.S. Congress, spatial models have been estimated for the Supreme Court, U.S. presidents, a large number of non-U.S. legislatures, and supra-national organizations. But, unfortunately, a potentially fruitful laboratory for testing spatial theories of policymaking and elections, the American states, has remained relatively unexploited. Two problems have limited the empirical application of spatial theory to the states. The first is that state legislative roll call data has not yet been systematically collected for all states over time. Second, because ideal point models are based on latent scales, comparisons of ideal points across states or chambers within a state are difficult. This paper reports substantial progress on both fronts. First, we have obtained the roll call voting data for all state legislatures from the mid-1990s onward. Second, we exploit a recurring survey of state legislative candidates to enable comparisons across time, chambers, and states as well as with the U.S. Congress. The resulting mapping of America's state legislatures has tremendous potential to address numerous questions not only about state politics and policymaking, but legislative poltics in general.

Why do some dictatorships establish institutions that are typically associated with democracy, such as legislatures or political parties? We propose a new theoretical model of institutions and power-sharing in dictatorships. We argue that by facilitating power sharing, political institutions promote the survival of dictatorships. However, authoritarian power-sharing through institutions is feasible only when it is backed by the crude but credible threat of a rebellion by the dictator’s allies. Whereas the allies’ political opportunities determine the credibility of the threat of a rebellion, institutions alleviate the commitment and monitoring problems that stem from the secrecy in authoritarian governance. We use both historical and large-N data to assess these new predictions about the relationship between political institutions, dictator tenure, and the concentration of power in dictatorships.

Current studies, mainly focused on the postwar period, are split on the impact of development on democracy. Examining panel data that run from early nineteenth century (a time where hardly any democracy was in place) to the end of the twentieth century, I show income matters positively for democratization – both after controlling for country and time effects and instrumenting for income. Since the effect of time partly varies over time, with some historical periods that are more favorable to democracy than others, I investigate the domestic variables (a decreasing marginal effect of growth in already developed economies) and international factors (the strategies of great powers toward small countries) generating that result. I finally probe the underlying processes through which income shapes political institutions, showing that development produces key changes in the distribution and nature of wealth that, in turn, make democracy a stable political outcome.

A notable feature of post-World War II civil wars is their very long average duration. We provide a theory of the persistence of civil wars. The civilian government can successfully defeat rebellious factions only by creating a relatively strong army. In weakly-institutionalized polities this opens the way for excessive influence or coups by the military. Civilian governments whose rents are largely unaffected by civil wars then choose small and weak armies that are incapable of ending insurrections. Our framework also shows that when civilian governments need to take more decisive action against rebels, they may be forced to build over-sized armies, beyond the size necessary for fighting the insurrection, as a commitment to not reforming the military in the future.