The Past Speaks

The European Public Choice Society Conference for 2014 will take place at Robinson College, Cambridge. Thursday April 3 to Sunday April 6 2014. 

Destined for Democracy? Labour Markets and Political Change in Colonial British America
Elena Nikolova, European Bank for Reconstruction and Development, United Kingdom

This paper proposes a new explanation for the emergence of democratic institutions: elites may extend the right to vote to the masses in order to attract migrant workers. I argue that representative assemblies serve as a commitment device for any promises made to labourers by those in power, and test the argument on a new political and economic data set from the thirteen British American colonies. The results suggest that colonies that relied on white migrant labour, rather than slaves, had better representative institutions. These findings are not driven by alternative factors identified in the literature, such as inequality or initial conditions, and survive a battery of validity checks

War and the Transition Away for Absolutism
Francesco Giovannoni, University of Bristol, United Kingdom

We propose a model to explain the transition from Absolutism to rule by Parliament. The Elite faces a trade-off between the loss of a war today with the future benefits under an alternative King. The threat of losing a war and being replaced may lead the King to compromise with the Elite and hand over power. The model has two key parameters. One is the fraction of the country’s wealth that is non-verifiable (and therefore hard for the King to tax or expropriate). The second is how likely the country is to be attacked. Our model gives a rationale for historical transitions away from Absolutism such as in ancient Athens, medieval Venice, 16th century Netherlands and the Glorious Revolution in 1688 England. The model also gives a rational for why (respectively) Sparta, other Italian cities, Spain, and France did not observe a similar transition.

Rebellions, Technical Change, and the Early Development of Political Institutions in Latin America
Alvaro Aguirre, Central Bank of Chile, Chile

This paper documents that differences in the early development of institutions in Latin America explain the subsequent economic performance in the region. It develops a model with the aim of identifying the factors behind this institutional development. The model predicts that the risk of conflict, which in the model arise due to labor coercion, leads to poor restrictions on the powers of chief executives. Since elite members cannot commit to a strong response to conflicts they empower the executive so he may react forcefully to conflicts. Technical advance leads to higher constraints as expropriation becomes more costly. But this does not happen with a large fraction of coerced labor because higher returns raise labor demand and conflict risks. Finally, the paper conducts an econometric exercise which shows that the dynamics of the institutional gap can be explained to a large extent by the risk of rebellion, globalization, and their interaction.

Also, people in Quebec and Scotland will likely be interested in the following paper:

If You Want me to Stay, Pay: A model of asymmetric federalism in centralised countries
Peter Claeys, Free University of Brussels, Belgium

Highly centralised countries like Italy and Spain have devolved fiscal power to regions in an asymmetric way. Some well-off regions get transfers that turn them into net recipients of the fiscal system. We demonstrate in a political economy model of fiscal federalism that in centralised countries, side-payments are used to compensate regions that are set back by the fiscal system and can credibly threaten to secede. Compensation blocks political negotiation on alternative “more efficient” fiscal systems. We study two regions, Valle d’Aosta in Italy and Pais Vasco in Spain, as an example.