Understanding privatisation policy political economy and welfare effects
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Understanding Privatisation Policy: Political Economy and Welfare Effects. Workpackage 2 The Determinants of Privatisation Policy. Humberto Llavador and Paolo Pinotti Universitat Pompeu Fabra Barcelona, UPP Kickoff Meeting February 24, 2006. WP2: The determinants of privatization policy.

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Understanding privatisation policy political economy and welfare effects

Understanding Privatisation Policy:Political Economy and Welfare Effects

Workpackage 2

The Determinants of Privatisation Policy

Humberto Llavador and Paolo PinottiUniversitat Pompeu Fabra

Barcelona, UPP Kickoff MeetingFebruary 24, 2006


Wp2 the determinants of privatization policy
WP2: The determinants of privatization policy

  • Combined theoretical and empirical approach.

    • Modeling political competition and the institutional framework.

    • Data collection on political institutions and political orientation.

    • Political fragmentation, ideology and privatization.

  • Expected outcomes

    • Guidelines for data collection on political institutions (July 2006)

    • Database on political institutions and political orientation (April 2007)

    • Two to four theoretical papers (Feb. & Nov. 2007)

    • Two empirical papers (July & Nov. 2007)


Understanding and modeling political competition and voting behavior
Understanding and modeling political competition and voting behavior.

  • Searching for a political competition model for parliamentary (proportional representation) and multiparty political systems.

    • The role of parliaments, coalitional governments and the opposition parties in policymaking and its influence in electoral outcomes.

    • A distinctive feature is that parties and voters care about margins of victory.


Understanding and modeling political competition and voting behavior1
Understanding and modeling political competition and voting behavior.

  • Incumbency advantage and legislature irresponsibility

    • Western democracies present high re-election rates.

    • How much do incumbents choose their policy actions to gain electoral support?

    • The political science literature has been careful to recognize that answering this question and measuring the true incumbency advantage is not as stratigtforward as one may think.

    • Understanding incumbency advantage and its causal relationship with legislature irresponsibility has direct implication on the understanding of the policy choices made by incumbents.


Privatization political fragmentation and ideology
Privatization, political fragmentation, and ideology behavior.

  • political fragmentation  privatization

    • “common pool” problem

    • “war of attrition” model

  • ideology  privatization

    • distributional and welfare consequences

  • privatization  ideology

    • strategic privatization (Biais & Perotti AER 2002)


Contribution
contribution behavior.

  • provide comprehensive database

    • approx. 40 countries (including all OECD)

    • over privatization period (1977-200…)

  • use it to test empirical implications of political economy models relevant to privatization

    • political fragmentation, ideology  timing of privatization

    • privatization methods  ideology


Database issues
database: behavior.issues

  • qualitative indexes

  • binary/discrete vs. continuous measures

    • trade off between descriptive power and discretion

  • accuracy of data

    • government composition (ok)

    • parliament composition (low)

    • electoral results (low)


Database political fragmentation

existing measures: behavior.

government and parliament

binary: cohesive vs. fragmented

simple number of parties

concentration indexes

elections

binary majoritarian vs. proportional

our proposal

government and parliament

concentration indexes

elections

continuous dis-proportionality index

database:political fragmentation

  • parties as basic cohesive political players


Database political fragmentation1
database: behavior.political fragmentation

  • effective number of parties (gov. and parl.)

  • electoral dis-proportionality


Database political fragmentation2
database: behavior.political fragmentation


Database ideology

existing measures behavior.

defined only for executive

binary/discrete indexes

arbitrary

our proposal

define measure for single parties

continuous measure

based on expert surveys

Huber & Inglehart (1995)

Laver and Hunt (1992)

Castles and Mair (1984)

aggregate by weighted average (weights = %seats)

database:ideology


Database sample sources
database: behavior.sample & sources

  • sample:

    • 21 OECD countries over 1977-2002

  • sources:

    • Liphart (1994)

    • Banks, Day & Muller (2002)

    • Electoral Studies (review, various issues)

    • Elections Around the World (web site)

  • cross-checking among the different sources


Database accuracy
database: behavior.accuracy


Empirical test timing of privatization
empirical test: behavior.timing of privatization

  • successful reform is public good

  • political fragmentation affects distribution of political, social and economic costs of reform

  • war of attrition model:

    • less fragmentation: faster reform

    • more fragmentation: longer time to reform

  • parallel literature on public debt / deficits

    • a remark: “war of attrition” has predictions for timing


Empirical test timing of privatization1
empirical test: behavior.timing of privatization


Empirical test timing of privatization2
empirical test: behavior.timing of privatization


Work in progress
work in progress… behavior.

  • expand the sample

  • conclude the analysis about the determinants of the timing

  • define a proper empirical test for the Biais & Perotti (2002)


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