George Tridimas

The Economics and Politics of the Structure of Public Expenditure

The paper derives a complete system ofdemand equations for public consumptionexpenditures as the outcome of rationalbehaviour in a model where governmentmaximizes expected electoral support. Theallocation of expenditures is found todepend not only on the prices of publicservices and total expenditure and tosatisfy the constraints of demand theory,which have been the focus of attention ofprevious empirical studies of theallocation of public expenditures, but, inaddition, on the prices of privateconsumption goods, the distribution ofvoter incomes and the expected change invoter support from varying the levels ofpublic provision.

Budgetary Deficits and Government Expenditure Growth: Toward a More Accurate Empirical Specification

The aim of this study is to provide a more accurate perspective of the empirical relationship between government expenditure growth and budget deficits. It specifies a model of demand for government expenditures that focuses on the effects of the tax revenue ratio, the relative price ofgovernment spending, income, population, political factors, and the dynamic structure of the relationship. The model is tested with United Kingdom data for the period 1955-1988. Similar to previous studies, the results show that deficit finance increases the demand for government spending, but they reject the implicit restrictions imposed on the empirical specifications of the previous studies.

Social Welfare and Coercion in Public Finance

This paper develops an expanded framework for social planning in which the existence of coercion is explicitly acknowledged. Key issues concern the precise definition of coercion for individuals and in the aggregate, its difference from redistribution, and its incorporation into normative analysis. We explore modifications to traditional rules for optimal fiscal policy in the presence of coercion constraints and determine the degree of coercion implied by traditional social planning. The paper maps the trade-off between social welfare and aggregate coercion and explores its implications for normative policy and the comparative evaluation of institutions, including competitive democracy.

The Dependence of Private Consumer Demand on Public Consumption Expenditures: Theory and Evidence

Two different approaches are used to study how the structure of public consumption affects the allocation of consumer expenditure. The first assumes that public expenditures condition consumer preferences and introduces them as additional explanatory variables to the Linear Expenditure System by means of linear translating. Assuming that consumers are constrained in consuming publicly provided goods, the second uses the Almost Ideal Demand System to model preferences as nonseparable between privately and publicly provided goods. The resulting demand functions depend on total private expenditure, relative prices, and the quantities of public provision. Testing the predictions with U.K. data establishes the importance of public consumption expenditures in determining private consumer demand.

A Political Economy Perspective of Judicial Review in the European Union. Judicial Appointments Rule, Accessibility and Jurisdiction of the European Court of Justice

The paper examines the benefits the sovereign member states of the EU expect to derive by granting the European Court of Justice the power to review the collective policy making decisions of the EU legislative bodies. Using the methodology of constitutional political economy it investigates the one-country one-judge rule of judicial appointments in the ECJ, the restrictions imposed on litigants to access the ECJ and the limits on the jurisdiction of the ECJ to review EU legislation. It also analyses how the presence of judicial review affects the size of the policy measures taken by the policy makers.

The European Court of Justice and the Annulment of the Tobacco Advertisement Directive: Friend of National Sovereignty or Foe of Public Health?

In Case C-376/98 Germany v Council the European Court of Justice annulled a Directive which banned the advertisement and sponsorship of tobacco. The judgment sanctions regulatory policy-making at the national rather than the Community level. The paper examines the legal basis of the annulment, its effect on economic efficiency and the implied role of the Court in the formulation of public policy in Europe. Within the institutional limits of the judicial power to determine policy, the Court focused on whether or not disparate national laws restrict free movement and distort competition and affirmed the primacy of the nation state to regulate economic activity.

Rent seeking in the democracy of ancient Greece

This chapter investigates the sources and contests for rents in ancient Athens. After reviewing the institutions of direct democracy invented and practiced during the fifth and fourth centuries BCE, the chapter focuses on the rents derived from controlling citizenship rights, slave labor, subjugation of foreign territories and silver deposits. It then examines the insights that the rent-seeking approach offers to explain the political economy of regulatory policies, tax revenues and public expenditures in Athens. A distinctive structure is revealed that combined free market exchanges, trade taxes but no income taxes, taxation of the rich in the form of property levies and mandatory financing of public services, auctions of public assets, tax farming, wide access to paid public office, where appointment was made by lot, and payment of theatre money to all citizens. Political leaders had opportunities for rent extraction and rent seeking, but they were also closely scrutinized by popular courts. This pattern is broadly consistent with the prediction that under direct democracy large universal benefits are provided to the poor majority of voters. The chapter concludes by proposing that the rent-seeking approach validates the view that economic rationality was prevalent in the ancient economy.

A Demand-Theoretic Analysis of Public Consumption Priorities in the United Kingdom

In the tradition of empirical studies of demand for public expenditure, this article examines the allocation of public consumption expenditures in the United Kingdom from 1963 to 1996. In addition to obtaining estimates of the effects of relative prices, total expenditure, and demographic variables, the results reveal that the constraints of homogeneity and symmetry cannot be rejected. However, the results reject the assumption of exogeneity of total expenditure employed by previous authors, so that it is important to augment the standard empirical specification by an auxiliary equation describing the evolution of the total expenditure conditioning variable. Finally, there is also evidence that some of the relationships studied have not been stable during the sample period.

Why Some Democracies are Headed by a Monarch

The paper inquires why in some countries traditionally ruled by absolute monarchs the monarchy survived in the form of constitutional monarchy but not in others. It considers constitutional monarchy as a negotiated settlement between the king and a liberal opposition to share office rents, while the alternative to the negotiation is a violent conflict that ends with either deposition of the monarchy or absolute rule by the monarch. A model of conflict between the king and the liberal opposition is explored where conflict for office rents is a costly contest with probabilistic outcomes and results in a reduction of available rents. The payoffs from conflict and rent sharing, modelled as a Nash bargain between the two sides, are compared. The model predicts that constitutional monarchy is more likely to emerge when office rents are large, the proportion of rents destroyed in fighting is large, the king enjoys a large fighting advantage, the cost of the collective action costs of the liberal is high, the liberal has a stronger preference for rents instead of anti–royalist ideology, but the effect of time preference is more nuanced.

Comparison of Central Bank and Judicial Independence

Doubts about the ability of elected representatives to resolve public policy issues and disillusion with their record have often led Constitutional framers to delegate decision making authority to independent bodies like central banks and judiciaries. Indeed, the development of the legal and the monetary system are closely interconnected: The successful operation of markets is founded on the rule of law and monetary stability. Both, however, are threatened by opportunistic governments which may violate the rights of citizens and generate inflation to pursue their own objectives. Application of the law and monetary stability require that credible constraints are imposed on the discretionary powers of the government.