This paper analyzes the interaction between corporate taxes and corporate governance. We show that the characteristics of a taxation system affect the extraction of private benefits by company insiders. A higher tax rate increases the amount of income insiders divert and thus worsens governance outcomes. In contrast, stronger tax enforcement reduces diversion and, in so doing, can raise the stock market value of a company in spite of the increase in the tax burden. We also show that the corporate governance system affects the level of tax revenues and the sensitivity of tax revenues to tax changes. When the corporate governance system is ineffective (i.e., when it is easy to divert income), an increase in the tax rate can reduce tax revenues. We test this prediction in a panel of countries. Consistent with the model, we find that corporate tax rate increases have smaller (in fact, negative) effects on revenues when corporate governance is weaker. Finally, this approach provides a novel justification for the existence of a separate corporate tax based on profits.
Underdevelopment is thought to be about lack of investment, and many political economy theories can account for this. Yet, there has been much investment in developing countries. The problem has been that investment growth has not led to output growth. We therefore need to explain not simply underinvestment, but also the missallocation of investment. The canonical example of this is the construction of white elephants–investment projects with negative social surplus. In this paper we propose a theory of white elephants. We argue that they are a particular type of inefficient redistribution, which are politically attractive when politicians find it difficult to make credible promises to supporters. We show that it is the very inefficiency of such projects that makes them politically appealing. This is so because it allows only some politicians to credibly promise to build them and thus enter into credible redistribution. The fact that not all politicians can credibly undertake such projects gives those who can a strategic advantage. Socially efficient projects do not have this feature since all politicians can commit to build them and they thus have a symmetric effect on political outcomes. We show that white elephants may be preferred to socially efficient projects if the political benefits are large compared to the surplus generated by efficient projects.
[in Jorge I. Domínguez and Chappell Lawson, eds., Mexico's Pivotal Democratic Election: Candidates, Voters, and the Presidential Campaign of 2000 (Stanford: Stanford University Press, 2004), pp. 321-344]
Mexico's 2000 presidential election campaign mattered. It closed the breach between Fox and old–line panistas, somewhat distrustful of his candicacy. It stimulated PAN voters to turn out at rates higher than those of PRI supporters on election day. It solidified the Cáredenas base in the PRD. It demoralized the PRI machinery. It detached voters from Labastida, leading them to vote for another candidate or to stay home on election day. It informed opposition strategic voters to support Fox. The proportion of voters influenced by the campaign to change their voting preference was at least two to three times greater than in U.S. presidential campaigns and at least twice Fox's margin of victory. In fact, the proportion of strategic voters alone gave Fox nearly all of his margin of victory.
War and its aftermath serve as powerful motivators for the elaboration and transmission of individual, communal, and national histories. These histories both reflect and constitute human experience as they contour social memory and produce their truth effects. These histories use the past in a creative manner, combining and recombining elements of that past in service to interests in the present. In this sense, the conscious appropriation of history involves both memory and forgetting—both being dynamic processes permeated with intentionality.
In this essay I explore the political use of the narratives being elaborated in rural villages in the department of Ayacucho regarding the internal war that convulsed Peru for some fifteen years. I suggest that each narrative has a political intent and assumes both an internal and external audience. Indeed, the deployment of war narratives has much to do with forging new relations of power, ethnicity, and gender that are integral to the contemporary politics of the region. These new relations impact the construction of democratic practices and the model of citizenship being elaborated in the current context.
This article uses a two–level framework to explain variation in Latin American populist parties? responses to the neoliberal challenge of the 1980s and 1990s.First,it examines the incentives for adaptation,focusing on the electoral and economic environments in which parties operated. Second,it examines parties? organizational capacity to adapt,focusing on leadership renovation and the accountability of office–holding leaders to unions and party authorities.This framework is applied to four cases:the Argentine Justicialista Party (PJ),the exican Institutional Revolutionary Party (PRI),the Peruvian APRA party,and Venezuelan Democratic Action (AD). In Argentina,the combination of strong incentives and substantial adaptive capacity resulted in radical programmatic change and electoral success.In Mexico,where the PRI had high adaptive capacity but faced somewhat weaker external incentives,programmatic change was slower but nevertheless substantial,and the party survived as a major political force.In Peru,where APRA had some capacity but little incentive to adapt,and in Venezuela,where AD had neither a strong incentive nor the capacity to adapt,populist parties achieved little programmatic change and suffered steep electoral decline.
Empirical research on the determinants of economic growth has typically neglected the influence of religion. To fill this gap, we use international survey data on religiosity for a broad panel of countries to investigate the effects of church attendance and religious beliefs on economic growth. To isolate the direction of causation from religiosity to economic performance, we use instrumental variables suggested by an analysis of systems in which church attendance and beliefs are the dependent variables. The instruments are variables for the presence of state religion and for regulation of the religion market, the composition of religious adherence, and an indicator of religious pluralism. We find that economic growth responds positively to religious beliefs, notably those in hell and heaven, but negatively to church attendance. That is, growth depends on the extent of believing relative to belonging. These results accord with a model in which religious beliefs influence individual traits that enhance economic performance. The beliefs are an output of the religion sector, and church attendance is an input to this sector. Hence, for given beliefs, more church attendance signifies more resources used up by the religion sector.
Theory synthesis is not only possible and desirable but is constitutive of any coherent understanding of international relations as a progressive and empirical social science. Numerous interesting proposals exist for formulating and empirically testing multitheoretical propositions about concrete problems in world politics. Below the reader will find a set of basic principles that should underlie testable theory syntheses. Yet other contributors to this forum—Friedrich Kratochwil, Yosef Lapid, Iver Neumann, and Steve Smith—do not share this openness to theory synthesis; their views range from deep skepticism to outright rejection. The real issue between us is whether pluralism among existing theories ought to be preserved for its own sake, as these colleagues believe, or whether theories ought to be treated as instruments to be subjected to empirical testing and theory synthesis, as this author maintains.
Since the Iranian Revolution and especially since the end of the Cold War, religion has come to be associated with militancy. Conflicts between gropus of different religions are perceived by many as more intense. Similarly, religious groups involved in conflict are perceived as more militant. Ethnic conflicts that have fueled this perception include the Palestinian-Israeli conflict, the ethnic rebellions in Chechnya, Suda, Cyprus, India, and Indonesia and the civil wars in Lebanon, Afghanistan, and the former Yugoslavia. Fundamentalist movements, especially Islamic movements, have also contributed to this perception. This article uses data from the Minorities at Risk dataset (MAR), as well as data collected independently, to ascertain whether this perception is correct for ethnic conflicts. That is, the article asks: are ethnoreligious minorities really more militant than other ethnic minorities?
The events of December 2001 seemed to transform Argentina?s international status from poster child to basket case. Throughout the 1990s, Argentina had been widely hailed as a case of successful market reform under democratic government. The radical economic transformation undertaken by the government of Carlos Saúl Menem had ended hyperinflation and restored economic growth, while the country enjoyed an unprecedented degree of democratic stability. Elections were free; civil liberties were broadly protected; and the armed forces, which had toped six civilian governments since 1930, largely disappeared from the political scene. Yet in late 2001, Argentina suffered an extraordinary economic and political meltdown. A prolonged recession and a severe financial crisis culminated in a debt default, a chaotic devaluation, and a descent into the deepest depression in Argentine history. A massive wave of riots and protests triggered a strong of presidential resignations, plunging the country into a profound crisis. For several months, Argentina teetered on the brink of anarchy. Widespread hostility toward the political elite raised the specter of a Peruú or Venezuelaústyle partyúsystem collapse. As the 2003 presidential election approached, many observers feared that the vote would be marred by violence or fraud.
Published in Journal of Democracy 14, no. 4 (October 2003): 152-166.