Daniel M. Sturm

Term Limits and Electoral Accountability

This Paper analyses the impact of term limits in a political agency model. We find that term limits reduce the value of holding office. This reduction in the re-election incentive can induce politicians to implement policies that are closer to their own private preferences. Such ‘truthful’ behaviour by incumbents will in turn result in better screening of incumbents whose preferences do not correspond to voters’ preferences. We show that these effects can make a two-term limit, which is the empirically most frequent restriction on tenure, ex ante welfare-improving from the perspective of voters. We present evidence from gubernatorial elections that the model’s main empirical implication is supported by the data.

History and Industry Location: Evidence from German Airports

A central prediction of a large class of theoretical models is that industry location is not uniquely determined by fundamentals. Despite the theoretical prominence of this idea, there is little systematic evidence in support of its empirical relevance. This paper exploits the division of Germany after World War II and the reunification of East and West Germany as an exogenous shock to industry location. Focusing on a particular economic activity, an air hub, we develop a body of evidence that the relocation of Germanys air hub from Berlin to Frankfurt in response to division is a shift between multiple steady states.

Trade and the environment: a survey of the literature

This survey examines the rapidly growing literature on the links between environmental policy and international trade. The paper reviews the main questions and results in the literature and tries to point out their relationship and significance. For the purpose of this survey the literature has been grouped into four main themes. The first two of these are optimal policy towards local and transboundary pollution respectively. The third theme is the impact of trade liberalisation on environmental quality and welfare. The final theme is the political economy of the trade and environment nexus.

Environment and trade: the implications of imperfect information and political economy

The last ten years have seen an upsurge in interest in the nexus of trade and environmental policies. In part this reflects the need to deal with major global pollution problems, and in part a concern that globalization may have adverse impacts on the environment. Environmentalists worry that globalization may trigger a race-to-the-bottom in environmental standards. While they would like to see upward harmonization in environmental standards, they are sceptical about the ability of supra-national agencies to achieve this. Industrialists also raise concerns about the need for a ‘level playing field’ in environmental regulations because of fears about the impact of environmental regulations on competitiveness. However, developing countries question whether disputes over differences in environmental regulations simply reflect a covert form of ‘green protectionism’. In this paper we review what light recent developments in economic analysis (conceptual and empirical) can shed on these concerns. We quickly summarize conventional trade models in which government bodies have perfect information and are welfare maximizers, and show that this analysis does not provide much support for the concerns or proposed policy recommendations. We then turn to models of political economy and imperfect information to see whether they provide a better explanation for the concerns and policy recommendations.