Political Power and Economic Policy: Theory, Analysis, and

Empirical Applications
by

Gordon C. Rausser, Johan F.M. Swinnen, and Pinhas Zusman

TABLE OF CONTENTS

Part 1. Political Power and Economic Analysis

1. Public Policy: The Lens of Political Economy

1.1. Introduction
1.2. The Lens of Political Economy
1.3. Literature Review
1.4. Structure and Major Themes of the Book

2. The Nash Solution to the Bargaining Problem

2.1. Introduction
2.2. The Nash Solution to the Bargaining Problem with Fixed Disagreement Payoffs
2.3. The Pivotal Axiom and Alternative Approaches
2.4. Conclusion

3. The Harsanyi Solution to the Bargaining Problem

3.1. Introduction
3.2. Endogenous Disagreement Payoffs
3.3. The n-person Bargaining Game
3.4. Reciprocal Power Relations
3.5. Conclusion

4. Political-Economic Analysis
4.1. Introduction
4.2. Organization of the Political System
4.3. The Political-Economic Structure
4.4. Conflict Resolution and the Equilibrium Relations
4.5. Conclusion

5. Normative Political-Economic Analysis

5.1. Introduction
5.2. Evaluation Criteria of Social Benefits and Costs
5.3. Political-Economic Efficiency Conditions
5.4. Evaluation of Structural Policies
5.5. Conclusion

6. Dynamic Political-Economic Analysis

6.1. Introduction
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6.2. The General Structure of a Political Economy as a Dynamic System

6.3. The Dynamics of Political Power
6.4. Political “Traps” and Policy Reforms
6.5. Conclusion

Part 2. Ideology, Prescription, and Political Power Coefficients

7. Political Power, Ideology, and Political Organizational Structures

7.1. Introduction
7.2. The Nature of Ideology
7.3. Ideological Commitment and Policy Formation
7.4. Implications for Empirical Analysis
7.5. The Organization of Interest Groups and Policy Formation
7.6. Interest Groups and the Organization for Collective Action
7.7. Political Enterpreneurs, Internal Group Organization and Within-Group Equilibrium
7.8. Group Political Preferences and Political Power
7.9. Implications of the Organization of Interest Groups
7.10. Government Structure
7.11. Political Parties
7.12. Conclusion

8. Political Power, Influence, and Lobbying

8.1. Introduction
8.2. General Formulation of the Framework
8.3. Costs of Organization
8.4. Lobbying as a Common-Agency Problem
8.5. Lobbying under Assymetric Information
8.6. Expanding the Framework: PERTs and PESTs
8.7. Conclusion

9. Constitutional Prescription and Political Power Coefficients

9.1. Introduction
9.2. Constitutional Rules and Policy-making Centers
9.3. Evaluation of Alternative Constitutional Rules
9.4. Constitutional Space Prescription
9.5. Conclusion

Part 3. Analysis of Specific Structures

10. The Political Economy of Commodity Market Intervention

10.1. Introduction
10.2. The Political Structure
10.3. Policy Formation: The Political-Economic Equilibrium
10.4. Welfare Implications
10.5. Conclusion

11. The Political Economy of Public Research and Development

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11.1. Introduction
11.2. Market Relations and the Demand for Public R&D
11.3. Management and Organization of Public R&D
11.4. The Political Structure
11.5. The Political-Economic Equilibrium Policy
11.6. Efficiency of the Political-Economic Equilibrium Public Research Policy
11.7. Conclusion

12. Political-Economic Analysis of Redistributive Policy and Public Good Investments

12.1. Introduction
12.2. The Government’s Policy Decisions
12.3. Price Subsidies and Research Expenditures: Are they Complements or Substitutes?
12.4. Conclusion

13. Interest Groups, Coalition Breaking, and Productive Policies

13.1. Introduction
13.2. Interest Group Structure
13.3. Targeting Payments under Heterogeneous Adoption
13.4. Noncoincidental Consumer and Taxpayer Interests and Output Constraints
13.5. Other Transfer Schemes
13.6. Conclusion
13.A.1. Derivation of (13.23)
13.A.2. Derivation of (13.25)
13.A.3. Derivation of (13.26)

14. Policy Reform and Compensation

14.1. Introduction
14.2. The Model
14.3. Compensation, Ownership, and Mobility
14.4. Conclusions
14.A Appendix to Chapter 14

15. Political-Economic Analysis of Land Reform

15.1. Introduction
15.2. The Economic Structure
15.3. The Political Structure
15.4. The Political-Economic Equilibrium
15.5. Evaluating the Economic Efficiency of Land Reform
15.6. Conclusion

16. Political-Economic Analysis of Water Resource Systems

16.1. Introduction
16.2. The Structure of a Water Resource Political Economy
16.3. The Physical Water Resource Subsystem
16.4. The Economic Structure
16.5. The Political Power Structure
16.6. The Hydrological-Political-Economic Equilibrium
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16.7. Conjunctive Water Use with Short Water Supply

16.8. Conclusion
16.A. The Effects of Districts’ Narrow Rationality on Water Prices and the Stationary
Groundwater Level (Ample Water Supply at the Northern Source)
16.B. The Effects of Districts’ Narrow Rationality on Groundwater Level when Groundwater
Pumping is Rationed (Short Water Supply)

17. The Political Economic Lens on Quality and Public Standard Regulations
17.1. Introduction
17.2. Interest Group Configuration
17.3. The Political Economy of Public Standards
17.4. Trade and Economic Development
17.5. A Dynamic and Strategic Political Economy Theory of Quality Regulation
17.6. Conclusion

18. Political-Economic Analysis in Transition Economies

18.1. Introduction
18.2. The Model
18.3. Restructuring the Intertemporal Tradeoff
18.4. Open and Closed Economies
18.5. Vicious and Virtuous Circles
18.6. Structural Conditions, Communist Organization and the “    Intertemporal Tradeoff.”
18.7. Conclusion
18.A. The Monotonicity Property

19. The Power of Bureaucracies: The European Commission and EU Policy Reforms
16.1 Introduction
16.2 The Decision-Making Process
16.3 Status Quo Bias: The Importance of External Changes for Policy Reform
16.4 The Power of the Commission
16.5 Conclusion

Part 4. Empirical Applications of Political Power Estimation

20. Political Econometrics

20.1. Introduction
20.2. Formulation
20.3. Estimation and Testing
20.4. Policy Instruments and the Negotiation Framework
20.5. Conclusion

21. The Political Econometrics of the Israeli Dairy Industry

21.1. Introduction
21.2. The Israeli Dairy Program
21.3. The Economic Structure of the Israeli Dairy Market
21.4. The Political Structure of the Israeli Dairy Industry
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21.5. The Political-Economic Equilibrium in the Israeli Dairy Market

21.6. The Internal Structure of the Political Conflict
21.7. Conclusion

22. Flexible Policy Instruments Given a Political Power Distribution

22.1. Introduction
22.2. Specification and Estimation of the Constraint Structure
22.3. Estimation of the Policy Governance Function
22.4. Estimation of the Automatic Adjustment Rules
22.5. Validation and Assessment of the Automatic Adjustment Rules
22.6. Toward a Simpler Set of Automatic Adjustment Rules
22.7. Conclusion
22.A. Estimated Constraint Structure Equations
22.A.1. Supply Side Equations
22.A.2. Demand Side Equations
22.A.3. Behavioral Equations

23. Estimating Statistical Properties of Power Weight Parameters and their Temporal Shifts
23.1. Introduction
23.2. Empirical Formulation
23.3. Bootstrapped Standard Errors for Power Weight Parameters
23.4. An Empirical Application to Japanese Policy
23.5. Conclusion

24. Role of Institutions in the Joint Determination of PERTs and PESTs

24.1. Introduction
24.2. PERTs and PESTs in Developing and Developed Countries
24.3. The Impact of Development: A Conceptual Model
24.4. The Impact of Institutions
24.5. Econometric Analysis
24.6. Regression Results
24.7. Conclusions and Implications