Pietro Navarra

Institutions and internation business: a theoretical overview

Globalization has led to a spectacular rise in the international exchange of goods and services. In many countries, international trade and foreign direct investment have led to unprecedented wealth creation, through such means as high value employment opportunities and the transfer of technology to local producers and buyers. Growing international competition has multiplied the number of viable locations for business facilities. Multinational firms compare and evaluate different locations in different countries on the basis of their expected profitability. If a location loses its competitiveness, firms move their operations, together with their capital and technical and organizational knowledge to locations where the conditions for business are more favorable. The competitive advantage of a given location has been traditionally seen in terms of macroeconomic conditions. Economic factors such as the size and growth of the market, the availability of labor and its costs, the inflation level, the degree of foreign indebtedness and the state of the balance of payments were considered to be the major indicators of location profitability for international investment and trade. Variations in the institutional structures across countries were either completely disregarded or treated only as unimportant secondary factors. This view was heavily influenced by neoclassical economic theory. This theory stated that equilibrium in the economy as well as the relevant economic variables,

Institutions and Market Reform in Emerging Economies: A Rent Seeking Perspective

The role of institutions as determinants of rent seeking success is well established. In this paper, we focus on institutions that have received little attention in the literature, namely electoral institutions. We examine three measures of electoral institutional structure that are hypothesized to be instrumental in determining the level of rent seeking. These are the type of electoral system, pluralistic or proportional; method of selection of the chief executive, presidential or parliamentary; and the number of electoral districts. An index of economic freedom is used as the metric for rent seeking opportunities created by governments. Theoretical implications of variation in these electoral institutions are developed and empirically tested employing data from 29 countries classified as having emerging market economies. Countries with emerging economies are expected to exhibit more institutional flexibility that more developed countries whose property rights are well established and defended. The empirical results are controlled for differences in a number of demographic and historical factors. Plurality electoral systems are more resistant to the political demands of rent seeking than proportional systems. Fewer election districts seem to reduce rent seeking opportunities. However, conditional on the type of electoral system, presidential systems are found to be no more resistant to rent seeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a countrys resistance to rent seeking while military spending and years of institutional entrenchment reduce it.

Plurality versus proportional representation: An analysis of Sicilian elections *

The competing merits of plurality and proportional representation have intrigued political economists and political scientists for quite some time. Of primary interest is whether one or the other system is better in serving the interests of the electorate. Since theoreticians are unable to unambiguously determine the answer to this question, the issue must ultimately be decided empirically.We use data from Sicilian elections, where the system was recently altered towards the system of plurality. We are able to demonstrate that the proportional representation system engenders greater information among voters and elicits greater commitment from them than plurality. We are also able to show that in larger towns increased information causes a more dispersed vote under a proportional representation system; further, this result does not hold under plurality. This may have some implications for the size of positional rents reaped by political parties under the two electoral systems.

Local Pork-Barrel Politics in National Pre-Election Dates: The Case of Italy

Political representation in the national assemblies isgeographic and elected representatives care about whogains and who loses in their electoral districts. Since legislators are re-election oriented, theirchances of electoral success are directly associatedwith the net benefits delivered to their constituents. In this perspective, geography is not only the basisfor political organisation and representation, butalso the hallmark of distributive politics. In thiscontext, it is likely that locally elected politiciansand party leaders standing in national elections wouldtend to cooperate in pre-election dates. In thispaper we argue that local administrators have anincentive to manipulate local government outlays inconnection with national election dates to enhance there-election prospects of their national party leaders. In particular, given the matching character ofnational grants with local investment spending, weexpect that in pre-election dates local policy-makerswould be induced to raise investment outlays beyondtheir standard growth rate. This would determineinefficient local public spending as a result of thegeographically-based system of democraticrepresentation. The case study under our investigationis the behaviour of Italian local policy-makers inconnection with national election dates.

Changing the rules: political competition under plurality and proportionality

From the wide range of voting schemes, two electoral rules, proportional representation (PR) and plurality (PL) attract primary interest. This paper examines the relationship between proportionality, voter information and a conception of the power of competing political parties under the differing electoral rules. Data are from three Sicilian provincial elections (1985, 1990 and 1994). Two measures of power and two measures of proportionality are used and Olsons theory of groups is applied to derive a measure of voter information. The results indicate that proportionality and voter information have a negative effect on political party power dilution under PR rules. However, these effects disappear under PL rules. We offer some interpretations of these findings.

Corruption and Referee Bias in Football: The Case of Calciopoli

Based on the Calciopoli scandal, which uncovered widespread corruption in Italian football, this paper quantifies the effect of referee bias on the performance of football teams. The impartiality of referees is often distorted by external factors which exert some emotional pressure in order to influence their decisions. On the other hand, corrupt referees consciously and deliberately try to distort the results of the sport contest, in order to favor the corrupting teams. Building on the implications of a model where performance in a sport contest depends on both effort and bribing, our results highlight the different effects of these two forms of bias, and help to shed light on several aspects of the corruption scandal.

Globalization, democratization and economic growth

Using a two-equations model we estimate whether and to what extent the interplay between FDI and democratization affects economic growth. Two results emerge. First, endogenous FDI impact significantly on economic growth. Second democracy is a substantive predictor of both FDI and growth.

Political and Economic Liberalization: Is this Relationship Non-Linear?

Why high levels of market liberalization can be supported by both repressive and liberal political regimes? Drawing from Acemoglu and Robinson (2006), we use a large dataset of world economies and document the existence of a U-shaped relationship between political and economic liberalization. This functional form explains the ongoing dynamics in the relationship between democratization and economic liberalization in the light of the political calculus that incumbent governments make when are confronted with policy decisions.

Electoral strategies in mixed systems of representation

The dispute over the conflicting merits of proportional representation (PR) and plurality (PL) electoral systems is mainly a debate over which element, representation or stability, should be emphasized. Advocates of PR do not accept policies as democratically valid if they are made on an inadequate representational base. On the other hand, advocates of PL argue that representation is meaningless if it is achieved at the expense of any possible agreement among the policy makers. These arguments appear repeatedly in the literature and with more practical impact, in constitutional assemblies. One of the outcomes of these arguments has been the development and implementation of mixed electoral systems that attempt to capture the strengths of both PR and PL systems. In this paper we analyze how parties form electoral coalitions in multiparty systems with mixed PR/PL electoral rules. We stress that mixed system of representation are created in the attempt to balance governance and representation by assigning a portion of the legislatures seats on the basis of plurality and the remaining seats on a proportional basis. This is operationalized through double-ballot-voting: a PL ballot for the allocation of the seats won by the candidates in single-member-college races and a PR ballot for the proportional allocation of the remaining seats among the competing parties. The aim of the paper is to formulate a general model to describe the electoral incentives that mixed electoral rules provide to political agents in multiparty systems. Italian 1994 and 1996 national elections are used as a case study to test the validity of our theory. A revised version of this paper has appeared: European Journal of Political Economy, Vol. 20, No. 1, pp. 227-253, 2004.

A Handbook of Alternative Theories of Public Economics

Contents: PART I: REVISITING THE THEORETICAL FOUNDATIONS 1. The Neglected Importance of the Austrian Thought in Public Economics Pascal Salin 2. In Defense of the Euro: An Austrian Perspective Jesus Huerta de Soto 3. Marxian Public Economics. With a Comment by Massimo Florio Giuseppe Coco and Silvia Fedeli 4. The Laffer Curve Muddle Vito Tanzi 5. Deficits, Tax Burden and Unemployment Francesco Forte and Silvia Fedeli PART II: REVISITING THE VALUES 6. Theories of Justice and Empirical Results Manfred Holler and Martin Leroch 7. Strategic Voting and Happiness Francesca Acacia and Maria Cubel 8. Religious Parties Dennis Muller 9. Western Religion, Social Ethics and Public Economics Nils Goldschmit and Andre Habisch 10. Indigenes, Immigration, and Integration: A Welfare-Economics Approach to Minority Rights Bengt Arne Wickstrom PART III: BEYOND RATIONALISTIC RATIONAL CHOICE 11. The Role of Memory in Modeling Social and Economic Cycles of Extreme Events Michele Caputo 12. Expanding the Theory of Tax Compliance from Individual to Group Motivations James Alm 13. The Effects of News Media on Public Choice: Theory, Evidence and Open Issues Francesco Sobbrio PART IV: OPTIMAL GOVERNMENT AND GOVERNMENT FAILURE 14. How Significant is Yardstick Competition among Governments? Three Reasons to Dig Deeper Pierre Salmon 15. Optimal Size of Government and Optimal Ratio between Current and Capital Expenditure Francesco Forte and Cosimo Magazzino 16. Government Failures in Railway Public Policy. The British Case Mark Casson 17. Cognitive Dissonance, Iron Triangle and Rent seeking. Sequester, and the Fiscal Cliff Gordon Brady 18. Cognitive Dissonance and Efficient Rent Seeking. Public Aid to Movies in Italy 1980 - 2011 Francesco Forte and Michela Mantovani PART V: PUBLIC ECONOMICS OF PUBLIC BADS 19. Bargaining in International Conflicts Resolution: UN Involvement and Conflict Settlement Dario Maimone Ansaldo Patti and Daniel Montolio 20. The Norm of Profits Extraction from Corruption by Bureaucracy and Market Size Arkadi Koziashvili, Shmuel Nitzan and Jossef Tobol 21. Alternative Views on the Origins and Impact of the Informal Economy Giorgio Brosio, Juan Pablo Jimenez and Roberto Zanola 22. Long-run and Shorter-run Criminal Cycles in the Economics of Public Bads Michele Caputo, Francesco Forte and Michela Mantovani