Jac C. Heckelman

Which Economic Freedoms Contribute to Growth

The literature on economic freedom and growth has utilized summary measures of freedom to determine its general significance for economic growth. We believe the summary measures lead to misspecification problems. We utilize Heston-Summers growth data to determine which of the disaggregated categories of economic freedom lead to growth and find that only a few of the indexes significantly affect growth. These growth regressions generate new weights for aggregating the indexes into an overall summary measure. This new measure can be interpreted as deriving a relative ranking of nations that have a relatively higher presence of growth promoting economic freedoms and more restrictions on those economic freedoms that inhibit growth. Copyright 2000 by WWZ and Helbing & Lichtenhahn Verlag AG

Political Business Cycles and Endogenous Elections

Empirical research of political business cycles (PBCs) may suffer from endogeneity bias when incumbent governments have discretion to call for an early election. Using an instrumental variable (IV) routine on data from Japan and the U.K., we find strong evidence to support the notion that election timing is a function of the economy rather than the macroeconomy being driven by elections as assumed in PBC. In single-equation regressions, no evidence of political cycles are found, but Hausman tests suggest elections are endogenous in our regressions. A monetary cycle in Japan and an inflation cycle in the U.K. are uncovered through IV estimation.

Consistent Estimates of the Impact of Special Interest Groups on Economic Growth

Empirical studies designed to testOlsons (1982) theory of institutional sclerosis aretypically forced to rely upon proxies to measure theability of special interest groups to engage inredistributive activities, which in turn areexpected to hinder economic growth. This note showsthat reliance on proxies biases the estimates towardzero. Here, instrumental variable routines areutilized which increase the estimated impact ofspecial interests on the economy.

Aid and Democratization in the Transition Economies

Past studies have not been supportive of the ability for foreign aid to create increased development and market liberalization. Less attention has been devoted to investigating the role aid has played in fostering democratic institutions. For a sample of 26 nations in Eastern Europe and former Soviet republics, I find more aid per capita is strongly associated with democratic reforms, but less robust is the relationship for aid as a percentage of gross national income. When analyzing various types of democratic freedoms, it appears both measures of aid improve the categories of judicial framework and governance, and aid per capita is also positively correlated with improvements in civil society and electoral process, but aid does not lead to more media independence.

Bribing voters without verification

Abstract This article distinguishes between two types of vote buying mechanisms. If vote choices can be monitored, vote buyers will not discriminate amongst prospective voters, regardless of how they are expected to vote. If voting is secret, a vote buyer will pay opposition voters not to vote which forces the opposition to pay its own voters to ensure they do vote. This implies the secret ballot may be less effective in curbing bribery than originally thought.

Proxies for Economic Freedom: A Critique of the Hanson Critique

Economic freedom indicators have become quite popular recently as a useful tool to quantify the relationship between a countrys institutions and its prosperity. In a recent article, Hanson (2003) criticizes these types of studies for: (i) failing to adequately distinguish between different proxies for economic freedom, (ii) not considering the potential for endogeneity, and (iii) accepting significance of economic freedoms ability to promote prosperity even though regression analysis generates “nonsensical” results. Closer inspection reveals that most of his arguments are questionable, do not apply to much of the literature, or are not original, and that he is guilty of misinterpreting his own econometric evidence relating freedom to the level of GDP.

Partisan Business Cycles under Variable Election Dates

This paper develops a model where rational economic agents face uncertainty regarding the timing of elections and which party will emerge victorious should an election occur. This electoral uncertainty affects the macroeconomy, where the size and direction of the impacts are dependent on the party in power in the current and previous period, time elapsed since the last election, and party popularity. Leftist governments are expected to sustain higher output levels throughout their electoral term compared to rightwing governments, and the partisan differences will continue to increase until the next election.

Rent-setting in multiple winner rent-seeking contests

Abstract In this paper, we analyze a multiple winner rent-seeking contest where the number of winners is set by a self-interested regulator. The winners receive a license to compete in a market. The structure of competition in the market influences the number of winners through the preferences of the regulator. The model indicates that Cournot competitors can be better off than firms that are able to collude on output determination.

Revisiting the Relationship Between Secret Ballots and Turnout: A New Test of Two Legal-institutional Theories

Two theories within the legal-institutional framework concerning the Australian ballot systems effect on voter turnout are analyzed. The vote market hypothesis assumes secret ballots were designed to end the buying and selling of votes. The secrecy the new ballot provided discouraged candidates from buying votes they could no longer verify, disproportionately affecting poor voters who would respond to this loss of payments by voluntarily abstaining. Alternatively, the theory of strategic disfranchisement predicts Blacks and illiterates were specifically targeted for disfranchisement. The new ballots were expected to be more difficult for these voters to use and they would then be effectively prevented from participating in the active electorate. Although turnout decreases under either theory, the normative implications are very different. Controlling for race and illiteracy, regression analysis suggests poor voters were less likely to vote a secret ballot. A similar effect is not found for Black and illiterate voters when controlling for income. The evidence is thus more consistent with the vote market hypothesis than with a pure disfranchisement effect.

Special-Interest Groups and Volatility

This paper explores the relationship between special-interest groups and volatility of GDP growth. In an unbalanced panel of 108 countries, we find a significant negative relationship between the number of interest groups in a country and the volatility of GDP growth.