Bumba Mukherjee

Political Parties and the Size of Government in Multiparty Legislatures: Examining Cross-Country and Panel Data Evidence

This article tests the effect of an increase in the number of represented political parties and the size of the majority party on the size of government—proxied by central government expenditure as a percentage of GDP—in multiparty legislatures. The author argues that an increase in the number of represented parties leads to higher central government expenditure. Conversely, as the size of the majority party grows from a bare-minimum majority to above the supermajority level, it has a nonlinear, specifically “cube” effect on central government expenditure. Panel data on central government expenditure from 110 countries are used to test these arguments. The results corroborate the theoretical claims and are robust in regression models where fixed-effects were introduced and endogeneity was corrected. Finally, an increase in the number of represented parties leads to higher government spending on subsidies and transfers but to lower spending on public goods.

Monetary Institutions, Partisanship, and Inflation Targeting

Since 1989, twenty-five countries have adopted a monetary policy rule known as inflation targeting (IT), in which the central bank commits to using monetary policy solely for the purpose of meeting a publicly announced numerical inflation target within a particular time frame. In contrast, many other countries continue to conduct monetary policy without a transparent nominal anchor. The emergence of IT has been almost completely ignored by political scientists, who instead have focused exclusively on central bank independence and fixed exchange rates as strategies for maintaining price stability. We construct a simple model that demonstrates that countries are more likely to adopt IT when there is a conformity of preferences for low-inflation monetary policy between the government and the central bank. More specifically, the combination of a right-leaning government and a central bank without bank regulatory authority is likely to be associated with the adoption of IT. Results from a spatial autoregressive probit model estimated on a time-series cross-sectional data set of seventy-eight countries between 1987 and 2003 provide strong statistical support for our argument. The model controls for international diffusion from neighboring countries by accounting for spatial dependence in the dependent variable, but our results indicate that domestic interests and institutions - rather than the influence of neighboring countries - drive the adoption of IT.

Labor (Im)mobility and the Politics of Trade Protection in Majoritarian Democracies

The two workhorse models of trade, Heckscher-Ohlin and Ricardo-Viner, provide leverage in explaining how societal groups divide over trade protection. Tension between the two trade models has significantly influenced the scholarship of trade politics, with explanations of trade politics adopting either the factor-based approach or the industry-based framework. No study has investigated how changes in factor mobility as a continuous variable influence the change in trade protection as a policy outcome. Building on recent scholarship on factor mobility, this article models explicitly how intersectoral labor (im)mobility and political competition between parties affect changes in trade protection in majoritarian democracies. The theoretical model predicts that when intersectoral labor mobility decreases governments in majoritarian democracies are more likely to raise trade barriers. We test this prediction in a time-series, cross-sectional sample of 32 OECD and non-OECD majoritarian democracies observed between 1980 and 2000. The empirical results corroborate our theory and remain robust when we control for alternative explanations, employ different estimation techniques, and use different measures of trade protection.

Partisan Politics, Interest Rates and the Stock Market: Evidence from American and British Returns in the Twentieth Century

We examine the relationship between government partisanship, interest rates and the mean and volatility of stock prices in the United States and United Kingdom. We suggest that traders in the stock market rationally expect higher (lower) post-electoral interest rates during the incumbency of the left-wing (right-wing) party - Democrats and Labor (Republican and Conservative) - and in election years when they expect the left-wing (right-wing) party to win elections. We hypothesize that expectations of higher (lower) interest rates decrease (increase) the mean and volatility of stock prices during the actual incumbency or even anticipation of a left-wing (right-wing) party holding the office of the chief executive. Results from empirical models estimated on data from U.S. and U.K. markets over most of the twentieth century statistically support our claims.

Modeling Two Types of Peace: The Zero-inflated Ordered Probit (ZiOP) Model in Conflict Research

A growing body of applied research on political violence employs split-population models to address problems of zero inflation in conflict event counts and related binary dependent variables. Nevertheless, conflict researchers typically use standard ordered probit models to study discrete ordered dependent variables characterized by excessive zeros (e.g., levels of conflict). This study familiarizes conflict scholars with a recently proposed split-population model—the zero-inflated ordered probit (ZiOP) model—that explicitly addresses the econometric challenges that researchers face when using a “zero-inflated” ordered dependent variable. We show that the ZiOP model provides more than an econometric fix: it provides substantively rich information about the heterogeneous pool of “peace” observations that exist in zero-inflated ordinal variables that measure violent conflict. We demonstrate the usefulness of the model through Monte Carlo experiments and replications of published work and also show that the substantive effects of covariates derived from the ZiOP model can reveal nonmonotonic relationships between these covariates and one’s conflict probabilities of interest.

State Capacity and the Environmental Investment Gap in Authoritarian States

We construct an n-period, constrained optimization model where the authoritarian ruler maximizes expected rents subject to budget constraint of available surplus. We show that the larger state capacity is in the previous period, the worse environmental quality will be in the next period: while infrastructural investment and environmental protection increase with state capacity, the former increases at a faster rate which enlarges the gap between the two—the environmental investment gap. Given infrastructural public goods typically damage the environment, the larger this gap is the worse the environmental quality would be. This follows from rulers’ optimizing logic of equating marginal returns once we assume the declining marginal productivity of factors of production of surplus. We model three types of air and water pollutants in autocracies as a function of state capacity and other relevant variables. State capacity is associated with higher levels of all three types of pollutants.

Introduction: Survey and Experimental Research in International Political Economy

Studies in international political economy (IPE) that use survey-response data sets and survey (or field) experiments have grown dramatically in recent years. New developments in survey and experimental methodology have arguably influenced IPE scholars not only to think more deeply about the microfoundations of the preferences, attitudes, and political behavior of key IPE actors but also to use survey or experimental methods to test causal claims and predictions. Yet the reasons for the rapid growth in survey and experimental methods in IPE are more multifaceted. We therefore seek to answer the following three pertinent questions in the introduction. First, what are the main substantive puzzles and issue-areas that IPE scholars analyze via survey and experimental methods in their research? Second, what are the main methodological advantages and drawbacks from using survey and experimental methods in IPE? Third, what are the key substantive theoretical and empirical insights that scholars have learned from recent research in IPE that employs either survey or experimental methods (or both)? In addition to answering these questions here, we also provide a summary of each article included in the special issue. The introduction concludes with a road map for future studies on survey and experimental research in IPE.

Droughts, Land Appropriation, and Rebel Violence in the Developing World

Scholars note that rebel atrocities against civilians often arise within rural areas in the developing world. This characterization is not far-fetched, and recent data show that rebel atrocities do predominately occur within rural agricultural regions. Yet the frequency of such incidents also varies substantially across different agricultural regions and years. What accounts for this observed variation in rebel-perpetrated atrocities against civilians within agricultural areas in developing countries? We develop a formal model to address this question, which contends that severe droughts can decrease food availability, prompting civilians to allocate food for immediate consumption and become increasingly willing to defend their diminishing supplies against rebels. This leads rebels to preempt the civilians’ defensive efforts by committing atrocities, which forcibly separate civilians from their lands and food stockpiles. In empirically testing this hypothesis at the subnational level across the developing world, we find robust support for our game-theoretic model’s predictions.

Electoral Particularism, Bank Concentration, and Capital Account Liberalization in Developing Democracies

Extant research suggests that democracy fosters capital account liberalization in developing countries. Yet the data reveal that there exists substantial variation in the extent of capital account openness across democracies in the developing world. When do democratic governments in developing states liberalize their capital account policies? We hypothesize that the market concentration of domestic private banks has a positive effect on capital account liberalization, but only when the degree of electoral particularism in these states is sufficiently high. Specifically, we claim that highly market-concentrated private banks have interests and the capacity to lobby elected politicians to liberalize capital account transactions. We then argue that politicians in particularistic democracies will respond to such lobbying pressure by dismantling capital controls as they have political incentives to cater to the interests of powerful bankers. Statistical results from a comprehensive data set provide robust support for our main hypothesis.

Electoral institutions and growth volatility: Theory and evidence

What accounts for the substantial variation in the temporal volatility of economic growth rates in democratic regimes? We claim that institutional differences between the majoritarian and proportional representation (PR) electoral systems explain why growth volatility is high in some democracies, but not others. Specifically, we suggest that unlike PR democracies, the pronounced career concerns of policymakers in majoritarian systems give them incentives to use their discretionary spending power to alter government spending levels sharply, which generates higher spending volatility in these countries. As a result, policymakers in majoritarian systems cannot credibly commit themselves to stabilizing spending levels. This causes uncertainty among economic actors about future spending levels and leads to unstable investment patterns that generate a higher volatility of growth rates in majoritarian democracies. Results from statistical models provide robust statistical support for our theoretical predictions.