Explanations of the boom/bust economic cycle characteristic of emerging markets have emphasized the role of institutional weaknesses in the financial sector in creating macroeconomic instability. Testing this proposition using aggregate data is complicated by the difficulty of identifying banks' credit supply decisions independently of credit demand by the domestic non–financial private sector. In this paper, a panel of Argentine bank balance sheet data is used to investigate the cross–sectional variation in bank lending decisions in response to macroeconomic shocks. The emergence of systematic cross–sectional patterns suggests bank characteristics – and thus bank behavior – play an important role in transmitting macroeconomic shocks to emerging market economies.
587_argbanks.pdfThis paper considers the effect of taxation on the location of foreign direct investment (FDI) and taxable income reported by multinational firms. Confidential affiliate–level data are used to compare the investment and income–reporting behavior of American–owned foreign affiliates. Ten percent higher tax rates are associated with 5.0 percent lower FDI, controlling for parent company and observable aspects of local economies, and 0.66 percent lower returns on assets, controlling for parent company and level of FDI. Tax effects are particularly strong within Europe, where ten percent higher tax rates are associated with 7.7 percent lower FDI and 1.4 percent lower returns on assets. Indirectly owned foreign affiliates exhibit even stronger tax effects, ten percent higher tax rates being associated with 15.3 percent lower FDI and 1.6 percent lower returns on assets. American firms finance a growing fraction of their foreign operations indirectly through chains of ownership, which now account for more than 30 percent of aggregate foreign assets and sales. Ownership chains are particularly concentrated among European affiliates. Since multinational firms from countries other than the United States face tax environments similar to those faced by indirectly owned affiliates of American companies, these results suggest a greater sensitivity of FDI to taxes for non–American firms. The results also suggest that European economic integration may have the effect of intensifying tax competition between European jurisdictions.
578_chains_of_ownership.pdfI feel honored to have been asked by my old friend Wang Gungwu to give a keynote speech in such distinguished company at this anniversary conference. Gungwu is one of the great scholars of the contemporary China field. I remember a remark made by my old Harvard teacher Yang Liansheng at a China Quarterly conference on history which I ran in 1964. (My goodness that was a long time ago!) Yang told Gungwu that his Chinese colleagues greatly admired his ability to use with equal facility the tools of both Western and Chinese historiography.
The subject I have chosen is "China in Political Transition," and I shall focus on succession politics. As everyone here today knows, China is at this very moment in the run–up to a most important political transition, succession at the very top of the Communist Party. How that succession process evolves will tell us a lot about the degree of institutionalisation that has taken place in the Chinese political system since the Cultural Revolution. It will also provide some insight into whether the new generation of leaders will be able to cooperate or whether they will continue to consider politics as a zero sum game.
572_singapore.pdfWorking Paper 100. East Asian Institute, 2002.
Future historians may someday look back on the 1990s as the decade when Europeans began to view the European Union without illusions. Although the core of European integration has always been pragmatic, functional cooperation of a largely economic nature—trade liberalization, regulatory harmonization, financial openness—the project was assisted by the existence of a “permissive consensus” of favorable public opinion, which permitted centrist political parties to satisfy the economic demands of powerful producer groups while justifying their actions with arguments about the role of the EU in promoting regional democracy and peace. As a result, European political elites only rarely criticized the EU. In recent years more open skepticism has been voiced. The first part of this essay evaluates the views of five leading European statesmen and thinkers, found in their Spaak lectures at Harvard University, on this issue: Ralf Dahrendorf, Uffe Ellemann-Jensen, Roy Jenkins, George Papandreou and Renato Ruggiero. The second part evaluates the most serious of recent criticisms of the EU, namely that it is democratically illegitimate. Concern about the EU’s ‘democratic deficit’ is in fact misplaced. Judged against the practices of existing advanced industrial democracies, rather than an ideal plebiscitary or parliamentary democracy, the EU is legitimate. Its institutions are tightly constrained by constitutional checks and balances: narrow mandates, fiscal limits, super-majoritarian and concurrent voting requirements and separation of powers. The EU's appearance of exceptional insulation reflects the subset of functions it performs – central banking, constitutional adjudication, civil prosecution, economic diplomacy and technical administration. These are matters of low electoral salience commonly delegated in national systems, for normatively justifiable reasons. On balance, the EU redresses rather than creates biases in political representation, deliberation and output.
595_spaak_foundation_moravcsik_paper5.pdfWhen social scientists talk about the adoption of new governance arrangements in a given policy area, their questions are most often functional: What will those new arrangements do better than the previous way of making policy? Yet politicians do not always, or even usually, pick policy solutions because they offer the best functional answer to a policy problem. Instead, they adopt solutions at a given time that advance their electoral or partisan interests as well as responding to a perceived policy problem (cf. Kingdon 1984). Thus, they not only want to do things (provide child care, increase economic development), but to do things that are politically useful (fortify their local political machine, distribute benefits to political supporters).
It in this light that I evaluate in this paper two of the most significant innovations in collaborative governance arrangements in Europe in the 1990s. The first is the 1993 French reform that created regional–level multi–partite institutions to develop proposals for regional education and training initiatives that aimed to spur private investment in human capital. The second is the institution of territorial pacts as the cornerstone of Italian development policy in the 1990s. The development pacts were to sponsor the participation of local secondary associations and politicians in proposing territorial development plans, with the goal of promoting ongoing cooperation among these actors at the territorial level. These reforms are especially significant because they took place in two unitary states with weak regional governments and weak traditions of corporatist policy–making. They were innovative, at least in form, because they attempted to build institutions of public/private collaboration to provide collective goods at a local level. As such, they simultaneously marked an attempt to break radically with the nature of past policy and with the institutions through which those policies had been designed. These were not equivalent to sectoral neocorporatist policies practiced especially widely in northern Europe (Lehmbruch 1984) both by virtue of the scope of private actors involved and of the delegation of policy autonomy to these actors. In terms of scope, they attempted to involve a wide range of local stakeholders, rather than monopolistic employers and unions. And in terms of policy autonomy, these new instances were empowered not merely to implement policies decided at the center, but to develop their own analyses of local problems and proposed responses to them. They were not merely bodies of decentralized implementation, but of decentralized policy design, with the institutions for designing policy moved away from national politicians and to local actors (among which politicians were just one, if still the primus inter pares).
The actual institutions have, so far, shown themselves to be quite heterogeneous. In this paper, I first summarize their experiences?both their political origins and their successes and failures in fulfilling the institutional mandate delegated to them. After reviewing the major developments in each institutional experiment, I draw parallels between the two ongoing experiments, focusing in particular on the organizational prerequisites for their success and the dilemmas they pose for public actors who would attempt to expand collaborative governance arrangements.
573_apsa_2002collab.pdf