Working Paper Series

The Einaudi Center's Working Paper Series offers scholars an opportunity to publicize their work and stimulate discussion on a wide range of topics. Cornell faculty from any department, school, or college may submit papers; we are also happy to consider papers presented at conferences, workshops, seminars, and other events at Cornell by affiliated or visiting scholars.

The Changing Politics of Central Banking: A Legal Perspective

Part 4 of the Changing Politics of Central Banking Series

Marcelo M. Prates


Central banks around the world emerged from the financial crisis in a curious situation. On the one hand, central banks were criticized because they had not been able to anticipate or prevent the crisis. On the other hand, central banks were called on to lead the way to economic recovery, using unprecedented means if necessary. We can, thus, tell two different, even opposite tales of central banks after the financial crisis. One of losing prominence, and the other of becoming the most powerful institution of our times. And both accounts are very true. How is that possible? This white paper reviews the legal literature in search of answers to this question. It starts by revisiting the issue of central bank independence and looking at how the different branches of government now interact with central banks. The paper also explores the legal questions associated with central banks making use of unconventional tools.

PDF icon Prates WP 06-2016 final.pdf

The Global Politics of Central Banking: A View from Political Science

Part 3 of the Changing Politics of Central Banking Series

Erin Lockwood


This paper reviews the political science literature on central banking from the early 1990s through the present, paying particular attention to the explicit or implicit conception of politics in the works reviewed. I begin by reviewing rationalist approaches to central bank independence from both the policy supply and demand sides. In the second section, I review literature that challenges and critiques this rationalist/institutionalist paradigm and its assumptions. The third section reviews studies that locate politics within central banks themselves and that analyze decision-making processes therein. The final section builds on the strengths of the existing literature to outline a future trajectory for political science scholarship on the global politics of central banking, one that incorporates a more sophisticated conception of politics and that is attentive to the post-crisis world in which transnational forces, governing ideas and worldviews, unconventional monetary policy, and non-monetary policy central bank functions are of paramount importance.

PDF icon Lockwood WP 05-2016 final.pdf

Challenges Confronting Central Bankers Today

Part 2 of the Changing Politics of Central Banking Series

Adam Hayes


The role of central banks in today’s global economy cannot be understated. These institutions hold great influence over important pieces of the economic engine, which in turn impact financial flows, access to credit, prices and global trade. Since the financial crisis of 2008-2009, the influence of central bank policymakers has only grown greater. Unprecedented actions and emergency measures have been taken to stabilize what otherwise could have been a global economic depression to rival the 1930’s. This paper reviews five questions that today’s central bankers face: whether to adhere to a rules-based monetary policy; if central banks should step into stabilize markets (e.g. QE); the importance of inflation targeting; the role of central bank independence; and the use of negative interest rates. Each of these issues is presented with arguments both in favor and against, empirical evidence to their effectiveness, as well as their possible unintended consequences and interconnectedness.

PDF icon Hayes WP 04-2016 final.pdf

Constructing and Maintaining Legitimacy: Sociological Perspectives of the Politics of Central Banking

Part 1 of the Changing Politics of Central Banking Series

Megan Doherty Bea


This working paper reviews central banking research produced in sociology and anthropology, most of which has been published in the last five to ten years. These studies focus on institutional structures and social and cultural processes that shape central bank activity, with significant attention to the ways in which central banks seek to legitimate their actions. I outline key themes that have emerged, including central banks’ internal decision-making and analysis of the international pressures they face. I review research examining the ways in which central bankers are influenced by one another, use performative rhetoric to manage the market, and engage in relational work with a variety of actors as they seek to maintain their legitimacy. This research is an important complement to traditional central banking research published in the fields of economics, political science, and law, and underscores the complexity involved in the day-to-day operations of central banks.

PDF icon Doherty WP 03-2016 final.pdf

Georgia in His Mind: A Cognitive Explanation for George W. Bush’s Decision-Making in the 2008 August War

Lisel Hintz


This paper explores the case of US President George W. Bush’s unwavering support for the Republic of Georgia in its aggressive engagement with Russia during the 2008 August War, a nearly universally acknowledged judgment error that puzzled Bush’s own team as much as it did foreign policy analysts. Finding explanations grounded in alliance behavior, audience costs, and resource security inadequate, the paper offers a cognitive heuristics account that focuses on the fundamental attribution error (FAE). Examining how the FAE can function in terms of assessing the actions of perceived friends reveals Bush’s failure to update his beliefs about the increasingly erratic behavior of Georgian President and Bush confidante Mikhail Saakashvili. In presenting an explanation for this empirical puzzle, the paper contributes a new perspective on the FAE of use in the burgeoning literature employing psychological approaches to foreign policy outcomes.

PDF icon HINTZ WP 2-16 FINAL.pdf

Mapping the Contours of Identity Contestation: Hybridization, Polarization, and Self-Marginalization

Lisel Hintz


This paper is part of a larger project that forays into the murky waters of sub-national identity contestation, understood here as struggles among members of a state’s population who support competing various proposals for the content of that state’s national identity. The paper attempts to capture these contours, map their shifts, and parse out the mechanisms by which these changes occur in Turkey, a state with multiple, politically salient identity cleavages. To do so, the paper analyzes these three key episodes that each constitute major challenges to the ruling party’s pursuit of identity hegemony for its own proposal of Ottoman Islamism. Each of these challenges shaping the contours of Turkey’s identity debates over the course of just two years (May 2013 – May 2015) represents a different dynamic of identity contestation: hybridization of opposition demonstrators during the Gezi Protests, polarization among supporters of the AKP and the Gülen Movement, and self-marginalization of the AKP through its increasingly radical rhetoric. Drawing from a wide array of popular culture and social media sources as well as interviews, surveys, and participant observation, the analysis provides new insight into the vernacular politics of identity in contemporary Turkey, while contributing to wider studies of social movements and contentious politics through its examination of various mechanisms of change.

PDF icon HINTZ WP 1-16 FINAL.pdf

After Crimea: Disarmament, Frozen Conflicts, And Illicit Trafficking Through Eastern Europe

Eliza Gheorghe


This paper examines the principal-agent problem in the case of Russia and breakaway republics in its near abroad, with a specific focus on nuclear smuggling. These spaces have been a haven for nuclear traffickers, posing important challenges for international efforts aimed at stemming proliferation. Given that secessionist regimes in this area owe their existence to Moscow’s military presence, scholars have blamed Russia for nuclear smuggling incidents in frozen conflict areas, arguing that Moscow has never been cooperative on nuclear matters. However, the historical record reveals that Russia does not take the dangers posed by nuclear smuggling lightly, as insurgent groups in the region have repeatedly threatened to use dirty bombs against it. A closer look at both the theory and the empirical evidence around the illicit trade with nuclear materials, drawing on examples of nuclear trafficking through Transnistria, shows that it is the state of lawlessness in these breakaway republics that makes these territories a fertile ground for smuggling networks. As organized crime engulfs these quasi-states, professional traffickers take over smuggling rings from amateurs. This paper shows that the increasing frequency of nuclear smuggling incidents in breakaway republics is better explained by the growing sophistication of trafficking networks rather than by Russia’s involvement in these frozen conflict zones..

PDF icon After Crimea Disarmament, Frozen Conflicts, And Illicit Trafficking Through Eastern Europe.pdf

Going Global In Academia: International Ranking Systems and Their Implication for Economic Research Variety

Vera Palea, University of Torino


There is nowadays a growing sense of unease about the current state and the direction of financial academic research. A number of critical studies have highlighted the failure of academia in anticipating the recent financial crisis and criticizing economic models used by financial market practitioners. Too much intellectual inquiry has operated within the parameters set by academic practice rather than questioning and challenging them. This paper argues that the current state of research is strictly linked to the adoption of international journal ranking lists as university management tools, which has led to a hegemony of the U.S. elite in research. Affected by a genuine ethnocentrism, U.S. research is very much capital market-oriented and optimized for liberal stock market economies, while completely ignoring different approaches and critical studies. The strength of economics and, more generally, social sciences instead lies in their rich, reflexive research analyses, carried out within their specific contexts, so essential to the social and economic advancement of society. Knowledge would therefore be better served by alternative research agendas tailored to the needs of different forms of capitalism. It is at times of great uncertainty and changes, such as the ones in which we are living, that advantages of variety in research can be appreciated. According to this view, this paper focuses on the European Union and presents a view of research that is strongly embedded in the EU constitutional framework and its ideal of social market economy

PDF icon Going Global In Academia International Ranking Systems and Their Implication for Economic Research Variety.pdf

Africanizing Apartheid: Identity, Ideology, and State-Building in Post-Independence Africa

Jamie Miller 


Between 1968 and 1975, the leaders of white South Africa reached out to independent African leaders. Scholars have alternately seen these counterintuitive campaigns as driven by a quest for regional economic hegemony, divide-and-lure realpolitik, or a desire to ingratiate the regime with the West. This article instead argues that the South African government’s outreach was intended as a top-down recalibration of the ideology of Afrikaner nationalism, as the regime endeavored to detach its apartheid program from notions of colonialist racial supremacy, and instead reach across the color line and lay an equal claim to the power and protection of African nationalism. These diplomatic maneuverings, therefore, serve as a prism through which to understand important shifts in state identity, ideological renewal, and the adoption of new state-building models.

PDF icon Africanizing Apartheid: Identity, Ideology, and State-Building in Post-Independence Africa

Standardizing Financial Reporting Regulation: What Implications for Varieties of Capitalism?

Vera Palea


Financial reporting is a powerful practice that shapes social and economic processes. This paper argues that there are fundamental reasons against current attempts to establish a single set of global financial reporting standards, moreover tailored to the needs of stock marketbased capitalism. Evidence shows that there exists more than one way of doing business. Social market economy, for instance, is one of the founding principles of the European Union. Standardizing financial reporting onto a single economic model could therefore harm alternative forms of capitalism. It is at time of great uncertainty and change that the advantages of variety can be appreciated. Consistent with this view, this paper claims that the optimal design of financial reporting regulation should depend on the specific institutional characteristics of the economic and political systems.

PDF icon Standardizing Financial Reporting Regulation: What Implications for Varieties of Capitalism?

A “War on Terror” by any other name…What did Obama change?

Matthew Evangelista


Barack Obama came into office promising a major departure from the policies of his predecessor regarding the so-called Global War on Terror. This paper compares the policies of the Bush and Obama administrations on four issues: 1) treatment of prisoners, particularly indefinite detention at Guantánamo Bay and trial by military commissions; 2) kidnapping, “extraordinary rendition,” and torture of terrorist suspects; 3) targeted killings by unpiloted aerial vehicles or “drones;” and 4) preventive wars and “humanitarian interventions.” It considers four main indicators of change: 1) whether the Obama administration continued existing policies or stopped them; 2) whether it publicly stigmatized illegal practices or remained silent; 3) whether or not it investigated crimes of Bush officials and punished the perpetrators; and 4) whether the Obama administration expanded the practices of its predecessors. The fourth indicator is most relevant to the topic of drone attacks, where the administration extended the practice of targeting killing by drones in number, frequency, space, and by category of target beyond what the Bush administration did. The paper concludes with brief speculation about the impact of the Obama administration’s policies – and other factors – on the evolution of legal and ethical norms governing the struggle against terrorism.

PDF icon A “War on Terror” by any other name…What did Obama change?

The EU Financial Crisis: European Law and Constitutional Law Implications

Hanno Kube


The EU Financial Crisis is not only an economic crisis, but also a crisis of the rule of law and of democracy. This paper, which deals with the European Law and the Constitutional Law Implications of the EU Financial Crisis, was presented as a lecture in the Berger International Speaker Lectures Series at Cornell Law School on April 11th, 2012. It outlines the core elements of the crisis and presents the strategies adopted by the EU and the Member States for coping with the crisis. After that, the author turns to the struggle with the rule of law that the crisis has led to and argues that Europe has taken some steps in order to rest the new fiscal policy rules and the rescue mechanisms on a legal framework, but that – on the whole – we are still on the way to reaching a satisfying level of compliance with the rule of law and corresponding clarity again. The great remaining challenge is the challenge of democratic legitimacy. Insofar, it is argued that the ESM can be democratically legitimized, at least in the case of Germany. However, the financial crisis gives rise to further questions regarding the future democratic foundation of the EU and regarding – as the German Federal Constitutional Court put it – the future ability of a constitutional state to democratically shape itself. The decisive question will eventually be whether the fiscal discipline aspect or the bail‐out aspect of the current political process will actually shape the Union. Complementing the monetary union by a transfer and debt union would have a detrimental effect on the future development of Europe. Therefore, financial support for a member state has to remain an exception, and it has to be granted under strict conditionality. State insolvency should remain an option.

PDF icon The EU Financial Crisis – European Law and Constitutional Law Implications

The Changing Relationship between Foreign Language Studies and International Studies at Cornell University

Heike Michelsen and Sydney van Morgan


Foreign language study has long been a critical component of international studies in higher education in the United States, and there is evidence that the popularity of language study is on the rise again. Recently, this rising demand for second-language instruction was confronted with unprecedented cuts in public and private funding for higher education. This study analyzes how the reduced resources have impacted the fields of language and international studies at Cornell and how reconfigurations in university priorities and strategies have affected the nature of foreign language instruction. The study is based on a series of interviews, faculty surveys, and secondary sources. This paper describes the current state of and trends in language and international studies instruction addressing issues of policy, organization and structure, resources, and performance. It also compares language studies at Cornell to eight other comparable universities and identifies key challenges at Cornell.

PDF icon The Changing Relationship between Foreign Language Studies and International Studies at Cornell University

Parties and Issues in Francophone West Africa: Towards a Theory of Non-Mobilization

Jaimie Bleck and Nicolas van de Walle


This paper builds a theory about electoral discourse in Africa and the salience of political issues since the return of competitive elections in the early 1990s, based on empirical materials from recent elections in Mali, Mauritania, Niger, Benin, Burkina Faso, and Senegal, six roughly similar semi-democratic francophone states in West Africa, which have conducted a least one reasonably free and fair election since the early 1990s. Drawing on content analysis from newspapers, the electronic press, party websites, as well as interviews and secondary sources on elections in these countries, we formulate two empirical arguments; first, issues do in fact captivate and potentially mobilize African voters. Our survey of the subregion suggests that politics is more substantive than generally credited. Second, however, we argue that political parties in the subregion fail to mobilize citizens along many of these issues, for two primary reasons. First, we hypothesize that the shared values and identities of political actors emerging during third wave transitions in the region shaped conceptions of what constitutes democratic politics. For the most part, the world view of Francophone, secular, elites have come to dominate political discourse, restricting the types of issues that could be incorporated into formal politics. Secondly, we employ the concept of issue-ownership to explain why opposition parties have difficulty mobilizing voters with programmatic rhetoric, and shy away from other issues, despite their vote-mobilizing potential.

PDF icon Parties and Issues in Francophone West Africa: Towards a Theory of Non-Mobilization

National Security and Property: The War on Terrorism as Mid-Wife to Changes in Ownership

Charles Geisler


Many have noted that the war on terror has driven a wedge between security needs and civil rights, yet the consequences of this war for property rights have received little attention. This paper explores the conditions under which private property rights are suspended despite their central place in the constellation of values for which the war on terror is fought. These conditions are exceptional – states of emergency in which governments amend their own rules, including normal protections for property. Focusing on the Department of Homeland Security (DHS), the principal institutional offensive against terrorist threats within the United States, I examine four DHS program areas for their property-related impacts. These impacts are direct, through eminent domain, as well as indirect, through the federal preemption of the police power historically reserved to state and local governance. The retreat of strong property rights long viewed as sacrosanct – referred to here as post property – does not apply evenly to all property owners and signals an important way that states of emergency can redistribute property and related wealth.

PDF icon National Security and Property: The War on Terrorism as Mid-Wife to Changes in Ownership

Chiapas, the South, and Mexico’s Regional Inequality in the Context of Trade Openness

Marcela González Rivas


This paper studies the southern state of Chiapas in the context of Mexico’s regional inequality, and particularly examines the effects of Mexico's trade policy. The paper shows that Chiapas is one of a group of southern states that have consistently performed worse than other states from 1940 to 2000, even during periods when regional inequality has improved. The paper demonstrates that Mexico’s trade policies have affected states differently, depending on their endowments of infrastructure. This partly explains why Chiapas and its neighbors – states with exceptionally low values of infrastructure – consistently performed worse than other states over the entire time period, and particularly poorly in the open trade regime. Finally, the paper argues that these low levels of infrastructure have deep historical roots in the government policies implemented during the 20th century. I conclude that it is unlikely that the south will catch up without policies specifically addressing this infrastructure gap.

PDF icon Chiapas, the South, and Mexico’s Regional Inequality in the Context of Trade Openness

The Institutional Origins of Inequality in Sub-Saharan Africa

Nicolas van de Walle


This paper seeks to provide a political explanation for the unexpectedly high levels of inequality found in the African region today. There is much variation within the region, however the common history and structural factors suggests a distinctly African kind of inequality. The paper describes the recent literature on African inequality and examines the limitations of traditional explanations for inequality in Africa. Instead, it is argued that natural endowments in the region shaped the nature of colonial institutions, which in turn created the conditions for high levels of inequality. The author concludes that the surprisingly high levels of inequality in Africa can be understood as part and parcel of a process of class formation linked to processes of state building that have their origins in the economic institutions of the early colonial state. Colonialism favored, in relative terms, certain indigenous groups, which often inherited the state at independence. Insofar as political power has often been used to gain economic advantages during the postcolonial era, inequality has changed little over the course of the last forty years, despite the official focus on development and poverty alleviation by donors and governments alike.

PDF icon The Institutional Origins of Inequality in Sub-Saharan Africa

The Political Economy of Corporate Responsibility in Germany, 1995-2008

Daniel Kinderman


During the past decade, Corporate Responsibility – the voluntary engagement of business for social and environmental ends above legally mandated minimum standards – has risen to prominence, if not pre-eminence in global economic governance. However, Corporate Responsibility is not uniformly distributed: the timing, extent and quality of CR varies significantly across countries. Germany is said to be a ‘laggard’ in Corporate Responsibility. This paper both describes and tries to explain this state of affairs, by focusing on business-led Corporate Responsibility associations, coalitions and intermediaries. Examining these, I find that German firms’ stance towards CR has been characterized by ambivalence. For example, German firms joined the EBNSC (since 2000: CSR Europe) in large numbers in the mid-1990s, only to cancel their memberships a few years later. I argue that this ambivalence can be explained with reference to Germany’s institutional framework, corporate governance and regulatory standards, which until recently left less ‘space’ for German companies to engage in CR initiatives compared with their counterparts in the U.K. and U.S.A. The increasing liberalization of the German economy during the past fifteen years has been accompanied by a growing dynamism of CR in Germany, and I present causal mechanisms which link CR and liberalization. The German case suggests that Corporate Responsibility may be emerging as a substitute, rather than a complement, to institutionalized forms of solidarity.

PDF icon The Political Economy of Corporate Responsibility in Germany, 1995-2008

Germany’s Role in Global Pharmaceutical Regulation

Robert Kaiser


Since the 1990s, the member states of the European Union (EU) have in an increasing number of cases agreed to pool their individual market power in order to valorize their bargaining position in various global governance arrangements. The most prominent examples of those interactions with multilateral regimes certainly are the World Trade Organization and the global climate regime. Against this background, this paper has a theoretical and an empirical aim. Concerning the theoretical perspective, the paper proposes an extended multi-level governance approach (eMLG) in order to analyze the dynamics of institutional change that emerge both at the EU and the member states’ level as a consequence of the agreement to Europeanize the mediation of national interests. Empirically, I refer to the example of global pharmaceutical regulation and I ask why even larger member states of the EU, such as Germany, engage in the Europeanization of interest mediation and under what conditions they are able to pursue their interests if the European Commission represents them at the global stage. In this respect I argue that not the size or the relative power of individual member states play a decisive role, but their ability to make use of the institutional multi-level structure.

PDF icon Germany’s Role in Global Pharmaceutical Regulation

Private Governance in International Affairs and the Erosion of Coordinated Market Economies in the European Union

Andreas Nölke


The variety of capitalism-perspective is particularly well suited for an assessment of the broader political and economic effects of transnational private governance, given its focus on the interaction between the diverse economic institutions that are regulating capitalist formations. The core notion here is “institutional complementarity,” i.e. “referring to situations in which the functionality of an institutional form is conditioned by other institutions” (Martin Höpner). Thus, substantial changes in one institution may have wide-ranging consequences for other institutions and, correspondingly, for the model as a whole. Within the “variety of capitalism” (VoC)-perspective, the most sophisticated and most frequently used frame of reference is the distinction between “Liberal Market Economies/LME” and “Coordinated Market Economies/CME,” with the first “Anglo-Saxon” model usually illustrated with the case of the U.S. and the latter “Rhenish” model with Germany (Peter Hall and David Soskice). Currently, we can observe that institutions that are strongly interlinked with the LME model are being transplanted into CME type economies by means of transnational private governance, particularly within the European Union. Examples include accounting standards, rating agencies and competition policy enforcement by law firms. Together, these recent activities tend to strongly undermine the institutional complementarities inherent in CMEs.

PDF icon Private Governance in International Affairs and the Erosion of Coordinated Market Economies in the European Union

Domestic Ideas and Interests in Global Governance: Comparing German and U.S. Preference Formation

Stefan A. Schirm


Financial crises underline the necessity for more effective governance of global markets. While the New Basel II Accord showed the possibility of multilaterally creating better governance, no agreement has been reached on the reform of the International Monetary Fund (IMF). Why do governments agree on a reform of global financial governance in some cases, but not in others? I argue that convergence and divergence of governmental positions towards new governance cannot be explained solely by the logic of the international system nor by globalization, but instead strongly reflect domestic ideas and interests. In addition, I argue that variation in success in achieving new governance is shaped by the different impact of ideas versus interests on the ability of governments to compromise internationally. But when do ideas prevail over interests and vice versa? In this regard, I argue that ideas prevail when new governance initiatives affect lobby groups only diffusely and concern fundamental questions on the role of politics in governing the economy. Interests prevail when specific lobby groups are affected directly and when new governance initiatives try to administer the distribution of costs and gains sectorally. The arguments are tested in case studies on the preference formation of the U.S. and German governments on the reform of the IMF and on Basel II in 2001-2007.

PDF icon Domestic Ideas and Interests in Global Governance: Comparing German and U.S. Preference Formation

Controlling the Locusts: Germany and the Global Governance of New Financial Markets

Hubert Zimmermann


In April 2005, during the national election campaign in Germany, the Chairman of the German Social Democratic Party, Franz Müntefering, likened private equity firms and hedge funds to swarms of locusts sucking out firms and laying off employees. His remarks were among the shrillest in an increasingly intense international debate on the better regulation of international financial markets. New forms of private capital have amassed such huge amounts of financial resources that state regulators not only in Germany increasingly fear risks for global financial stability. However, Germany is particularly active in this regard. During its presidency of the G-8 in 2007, Germany has made the tighter regulation of global financial industries one of its core objectives. These initiatives lead directly into some of the core controversies of the literature on global economic governance: what is the extent of state capacity in regulating global financial markets, which forms of regulation are achieved, and what are the theoretical instruments allowing us to explain cooperation and non-cooperation among states and between states and private actors? This paper looks at the reasons and prospects of Global Economic Governance initiatives under the new financial (non)architecture, using Germany as empirical example.

PDF icon Controlling the Locusts: Germany and the Global Governance of New Financial Markets

Clitics in South Slavic Languages: The View from the Interfaces

Molly Diesing, et al.


This paper analyses the placement of clitics that occupy the so-called "second" position in Serbian, in which both the first word or the first constituent can serve as host positions for clitics. In both corpus investigations and experimental research, we found that in Serbian there is more than one type of first position, both in the case of first word, and in the case of first constituent. Moreover, we found two types of cases depending on whether the sentence initial element is, or belongs to, either an argument or the predicate, yielding a four part classification. The experiments clearly establish preferred clitic placement in the two types of sentences. All four types are represented both in the investigated corpora and in the production and perception patterns, albeit in very different proportions. We attribute these differences to different discourse conditions between the first word and first phrase positions within each category.

PDF icon Clitics in South Slavic Languages: The View from the Interfaces

Opposition Parties in Sub-Saharan Africa

Lise Rakner, et al.


The paper argues that the scholarship on democracy in Africa has paid insufficient attention to the nature of opposition parties. It first examines opposition parties in contemporary Africa, studying trends in electoral composition and legislative politics. The paper then links informal and formal institutions, focusing on opposition parties and on the factors that may explain the strength and weaknesses of opposition parties across the region in recent years. The authors suggest a weak or even non-existent relationship between level of democratic institutionalization and the size of opposition parties across the region. Comparative and case analyses of sub-Saharan African elections confirm the weakness of opposition parties in Africa as a striking characteristic of the multi-party systems in the region.

PDF icon Opposition Parties in Sub-Saharan Africa

Europe at 50 – A Mid-life Crisis? ‘Democratic Deficit’ and ‘Sovereignty Surplus’ Part Three of the Constitution Trilogy

Neil Walker


The paper argues that the resilient democratic deficit of the EU is closely connected to its equally longstanding ‘sovereignty surplus.’ The division and competition of sovereignty between member states and the EU has created a more crowded space of overlapping polities, each requiring democratic legitimation but each also with the propensity to detract from the democratic capacity of the others. Secondly, the very gravity and divisiveness of what is at stake for the various parties involved and positions implicated in the sovereignty surplus renders the question of the proper diagnosis and treatment of the ensuing democratic deficit highly controversial and, indeed, sharply polarized. Thirdly and finally, and bringing us to the current constitutional controversy and mid-life crisis, the sovereignty surplus also makes the question of praxis - of how to secure the very ground of initiative necessary to develop and act on a more inclusively resolved diagnosis and treatment of the democratic deficit – whatever that may be, difficult if not intractable.

PDF icon Europe at 50 – A Mid-life Crisis? ‘Democratic Deficit’ and ‘Sovereignty Surplus’ Part Three of the Constitution Trilogy

Rejecting the Constitution or the Market? Where does the Popular Resistance to European Integration Come From?

Jens Beckert


The French "non" in the referendum on the Constitutional Treaty in 2005 has brought the train of European integration to an unexpected stop. The rejection of the Constitution testifies to a gap between elite enthusiasm for further European integration and popular disenchantment that originated long before the referendums on the Constitutional Treaty. Why does European integration increasingly confront popular resistance? The answer given to this question relates not primarily to the economic payoffs and costs of European integration but rather to the normative implications of market liberalization. I argue, primarily with reference to France, that popular disenchantment and resistance reflect fears from ongoing economic changes which lead to a more and more direct exposure of people to market forces that escape political control.

PDF icon Rejecting the Constitution or the Market? Where does the Popular Resistance to European Integration Come From?

Between Zollverein and Patrie: The French National Front, the “New” April 21 and the Rejection of the European Constitution

Mabel Berezin


On May 29, 2005, French citizens voted to reject the proposed Constitutional Treaty for Europe. The empirical center of this article is the French National Front’s postreferendum claiming of the “No” vote as it looked forward to the 2007 French Presidential elections. April 21, 2002, the date that Jean Marie Le Pen came in second in the first round of the Presidential elections, emerged in the pre and post referendum period as an iconic event, a form of history as political metaphor, that all sides deployed to structure arguments about the future of France and the future of Europe. This article first explores the pre and post referendum discussion of the constitution; second, turns to the French and European context to situate the vote; and third, explores the landscape of political possibilities that the vote and its aftermath presented.

PDF icon Between Zollverein and Patrie: The French National Front, the “New” April 21 and the Rejection of the European Constitution

Minority Politics in Ethnofederal States: Cooperation, Autonomy or Secession?

Valerie Bunce


Leaders of minority communities in multinational states have taken one of three positions when interacting with their central governments. They have accepted the institutional status quo; they have pressed for moderate changes, such as increased cultural and political autonomy; or they have demanded a state of their own. What explains this variation? The purpose of this paper is to develop an answer by comparing political dynamics from 1989-2003 in nine regions located within three postcommunist ethnofederations: Georgia (Southern Ossetia, Abkhazia and Adjaria), Russia (Chechnya, Dagestan and Tatarstan) and Serbia-Montenegro (Kosovo, Montenegro and Vojvodina). Two conclusions are drawn. First, while many familiar economic, cultural and historical factors fail to explain differences across country and over time, two short-term political factors seem to be influential. One is variations in international support for minority leaders and their political agenda. The other is variations in the outcome of regional struggles for power once communism and the state unravel. As a result, in postcommunist ethnofederal states, increasing political competition creates a dilemma for new states in transition to democracy. While competition at the center seems to encourage democratization, competition in the regions threatens the state.

PDF icon Minority Politics in Ethnofederal States: Cooperation, Autonomy or Secession?

Bringing Down Dictators: The Diffusion of Democratic Change in Communist and Postcommunist Europe and Eurasia

Valerie Bunce, et al.


What explains the cross-national diffusion of democratic change? A comparative analysis of two waves of such changes in postcommunist Europe and Eurasia from 1988-2005 suggests that three factors are critical. One is an expansion of opportunities for change; another is the appeal of positive precedents, especially when parallels can be drawn between the “sender” and the “receiving” country; and a third is the rise of transnational groups supporting political change. For subversive innovations, all three factors seem to be necessary—which is one reason why each of the waves of democratic change came to an end.

PDF icon Bringing Down Dictators: The Diffusion of Democratic Change in Communist and Postcommunist Europe and Eurasia

Defining and Domesticating the Electoral Model: A Comparison of Slovakia and Serbia

Valerie Bunce, et al.


How do political innovations move from one country to another, and how do they change as they make their cross-national journey? This paper addresses these under-studied questions in the literature on diffusion by comparing two applications of the electoral model of democratization – an approach to elections in semi-authoritarian settings that uses, for example, energetic campaigns and voter registration and turnout drives in order to defeat authoritarian incumbents or their anointed successors. The first case is Slovakia in 1998, and the second is Serbia in 2000. Several factors encouraged the cross-national spread of the electoral approach to democratization – the appeal of positive political precedents in the “neighborhood;” the modular character of the electoral model; and the formation of an activist transnational community supporting democratization through electoral change. While in both countries dictators were defeated, in Serbia massive protests were required to force Milosevic to respect the verdict of the voters. This contrast – between elections and elections combined with mass protest – speaks to the rather unusual combination in Serbia of a highly repressive political environment, yet a long history of popular mobilization.

PDF icon Defining and Domesticating the Electoral Model: A Comparison of Slovakia and Serbia

Bringing Down Dictators: American Democracy Promotion and Electoral Revolutions in Postcommunist Eurasia

Valerie Bunce, et al.


The war in Iraq has led many to question whether the United States has the capacity to promote democracy abroad. In this paper, we analyze recent American efforts to support democratic change in postcommunist Europe and Eurasia – in this case, by supporting elections from 1996- 2005 that led to the defeat of dictators and the empowerment of the liberal opposition. We argue that this approach to democracy promotion – the electoral model – can be quite successful, both in the sense of providing an important democratic opening and in the sense of diffusing easily from one semi-authoritarian political context to another. It is successful because it is both modular and modest, and because it invests not just in democratic results, but also democratic practices.

PDF icon Bringing Down Dictators: American Democracy Promotion and Electoral Revolutions in Postcommunist Eurasia

The Crisis of Care, International Migration and the Capabilities Approach: Implications for Policy

Lourdes Beneria


Focusing on what in Europe has come to be called “reconciliation policies” – or policies to balance family and labor market work – this paper poses the question of whether some of the legislative efforts introduced in Europe during the past decade can be applied to Latin American countries. The paper argues that there are differences between Northern and Southern countries in this respect, and it focuses mostly on two of them – the extent of the informal economy and international migration – which make this application difficult. Using the capabilities approach framework, the paper outlines other lines of action for public policy that can be useful to design reconciliation policies for the South. Finally, the paper argues that this type of policies represents an urgent issue whose time has come in order to rethink gender equity within the emerging new gender order across countries.

PDF icon The Crisis of Care, International Migration and the Capabilities Approach: Implications for Policy

The Path from Neopatrimonialism: Democracy and Clientelism in Africa Today

Nicolas van de Walle


The paper explores the impact of recent democratization in Africa on political clientelism in Sub Saharan Africa. It argues that clientelism is a ubiquitous feature of modern politics and is unlikely to disappear soon, but it shows that the nature of clientelism varies according to the type of political regime. The neo-patrimonial clientelism that has dominated post-colonial Africa is deeply incompatible with democratic politics and the paper predicts that successful democratization will change its dynamics. The paper suggests that the main obstacles to this successful transition towards a more democratic clientelism are likely to be the region's economic stagnation and the deeply ingrained habits and expectations of politicians.

PDF icon The Path from Neopatrimonialism: Democracy and Clientelism in Africa Today

Return of the Twin Deficits: Consequences for the Dollar and the Economy

David P. Calleo


Does America’s return to “twin deficits” imply an unstable dollar or a return to the “declinism” of the 1980s? Ending the Cold War and establishing the Euro did leave the dollar in a fundamentally weaker position. The Clinton administration, however, eliminated the fiscal deficit. And although the large external deficit continued to increase, it was financed to a great extent by foreign direct investment that strengthened the real economy. Since the crash, however, the dollar has depended on more official and less stable forms of support – mostly portfolio investments from Japanese and Chinese central banks. In the longer term, given the difficulties of adjusting Western living standards to Asian competition, a global system of floating currency blocs seems probable. The U.S. is unlikely to maintain its dominant position by converting the “war on terror” into a geopolitical alliance comparable to the Cold War.

PDF icon Return of the Twin Deficit: Consequences for the Dollar and the Economy

Can’t Block, Must Run: Small Firms and Appropriability

Aija Leiponen, et al.


This empirical study examines small firms’ strategies towards appropriating the returns to their investments in innovation and finds that they are qualitatively different from those found in earlier studies of more generally representative samples of firms. First, few of the smallest firms appear to benefit from patenting. Even within this sample of small firms, only the largest firms were likely to identify patents as the most important method of appropriating innovation returns. Thus, the strategic choice for most small firms is between secrecy and speed to market. The smallest firms and those in low technology or complex product industries tend to prefer speed, while small investments in R&D, discrete product technologies, and affiliation with higher technology industries explain preference for trade secrets. These results raise policy questions regarding the functioning of the existing systems of intellectual property rights when key policy goals include innovation by and growth of small firms. Furthermore, innovation policies that mandate collaboration are likely to significantly influence firms’ appropriability strategies.

PDF icon Can’t Block, Must Run: Small Firms and Appropriability

The Chixoy Dam and the Achi Maya: Violence, Ignorance, and the Politics of Blame

Barbara Deutsch Lynch


In early 1980, a campaign of terror was waged against Maya Achi living in the community of Rio Negro. The campaign coincided with construction of the dam across the Rio Chixoy. The project was deeply flawed on many counts, and a connection between the project, the Guatemalan National Electrification Institute (INDE), and acts of terror has been firmly established. Project documents do not suggest that international financial institutions, consultants, and contractors played a direct role in the terror, but they do reveal a profound multidimensional ignorance about the meaning of place for Maya culture and economy on the one hand, the civil war unfolding in the area, and the evolution of Guatemala’s predatory state. The project process as it evolved in the post-Bretton Woods world made inscrutable what in retrospect seem like obvious and highly problematic contextual issues. Did project funders and contractors have an obligation to consider these issues? And, if so, did they have an obligation to base their decisions to continue funding or withhold funding this information?

PDF icon The Chixoy Dam and the Achi Maya: Violence, Ignorance, and the Politics of Blame

Presidents and War

Elizabeth Sanders


The institution of the American presidency became remarkably war-prone with the development of new resources and a long-term war rational in the post-World War II era. Militaristic tendencies were augmented with changes in recruitment processes and media developments after the early 1970s. I delineate the logic of the increasing tendency to presidential uses of force for political reasons, supply some evidence from the Correlates of War data, and conclude with the consequences-both obvious, and more speculative, of the presidential temptation to war, and the legal and constitutional changes that might be adopted to lessen that tendency.

PDF icon Presidents and War

Producing Security Dilemma out of Uncertainty: The North Korean Nuclear Crisis

Jae-Jung Suh


This article analyzes the North Korean nuclear crisis as an empirical case that reveals the security dilemma logic present in world politics that is overlooked in international relations theories of security dilemma. Although many typically blame either Pyongyang or Washington for the crisis, this article argues that both the ‘North Korean threat’ thesis and the ‘U.S. threat’ thesis are incomplete and partial as an explanation for the North Korean nuclear crisis. A more comprehensive, and less partial, understanding of the crisis can be achieved by synthesizing the antithetical hypotheses into a dynamic model that takes into account the strategic interactions between Pyongyang and Washington. In other words, the crisis itself is a manifestation of the security dilemma logic that North Korea and the United States have produced, acting under uncertainty about each other’s capacity and intention. And the security dilemma itself has ensued because their behaviors are guided by their identities in a way that exacerbates their social relationship. The North Korean nuclear crisis is, in short, constituted by destructive interactivity between their behaviors and identities. To acknowledge the reality of security dilemma and the necessity of positive reciprocity would be the necessary first step in the long journey toward ending the nuclear crisis.

PDF icon Producing Security Dilemma out of Uncertainty: The North Korean Nuclear Crisis

Trade Liberalization, Child Labor and Schooling: Evidence from India

Eric Edmonds, et al.


Few issues are more controversial in the contemporary globalization debate than the effects of trade liberalization on poverty and well-being in low-income countries. The question of how changes in trade policy affect child labor and schooling is particularly contentious. We study the relationship between changes in trade policy and schooling and child labor using detailed household level data from the Indian National Sample Survey (NSS) spanning the period of trade liberalization initiated in 1991. We explore the causal link between liberalization and changes in child labor by relating child labor to district and inter-temporal variation in exposure to tariff cuts. During the time period of our study, India experienced dramatic declines in child labor and increases in schooling attendance. However, we find that children living in districts more exposed to tariff cuts observed smaller declines in child labor and smaller increases in school attendance. We believe the findings reflect some of the adjustment costs associated with trade liberalization, and they illustrate how even temporary adjustment costs may have long-term effects on the impacted.

PDF icon Trade Liberalization, Child Labor and Schooling: Evidence from India

Do the Poor Pay More?

Orazio P. Attanasio, et al.


We study the prices of basic commodities that are relatively homogeneous (rice, carrots, beans) in some rural communities in Colombia. We identify the existence of considerable price differences within the same geographic clusters. Unlike the existing literature, we do not interpret them as reflecting differences in the quality of the commodities. Instead, we argue that some of them reflect bulk discounting. In particular, using an instrumental variable approach, we identify a relationship between price paid and quantity purchased. We argue that such a relationship identifies a price schedule available to consumers in these villages. The effects we uncover are substantial and are obtained after controlling for a variety of confounding factors, including village fixed effects and the distance from the town centre and markets. The discounting is substantial, even for a basic staple such as rice. As poor households are more likely to buy small amounts (a fact that we document), we argue that poor households do pay more.

PDF icon Do the Poor Pay More?

Incentives and Prosocial Behavior

Roland Benabou, et al.


We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or imagerelated) create doubt about the true motive for which good deeds are performed and this “overjustification effect” can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and more generally those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.

PDF icon Incentives and Prosocial Behavior

How Important is Selection? Experimental Versus Non-experimental Measures of the Income Gains from Migration

David McKenzie, et al.


Measuring the gain in income from migration is complicated by non-random selection of migrants from the general population, making it hard to obtain an appropriate comparison group of non-migrants. This paper uses a migrant lottery to overcome this problem, providing an experimental measure of the income gains from migration. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the income gains from migration to be obtained by comparing the incomes of migrants to those who applied to migrate, but whose names were not drawn in the lottery, after allowing for the effect of noncompliance among some of those whose names were drawn. We also conducted a survey of individuals who did not apply for the lottery. Comparing this non-applicant group to the migrants enables assessment of the degree to which non-experimental methods can provide an unbiased estimate of the income gains from migration. We find evidence of migrants being positively selected in terms of both observed and unobserved skills. As a result, non-experimental methods are found to overstate the gains from migration, by 9 to 82 percent. A good instrumental variable works best, while difference-in-differences and bias-adjusted propensityscore matching also perform comparatively well.

PDF icon How Important is Selection? Experimental Versus Non-experimental Measures of the Income Gains from Migration

Does Corruption Produce Unsafe Drivers?

Marianne Bertrand, et al.


We follow 822 applicants through the process of obtaining a driver’s license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as “failures” on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal “agents” to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents’ pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.

PDF icon Does Corruption Produce Unsafe Drivers?

Understanding Pareto Inefficient Intrahousehold Allocations

Richard Akresh


Udry (1996) uses household survey data and finds that the allocation of resources within households is Pareto inefficient, contradicting the main assumption of most collective models of intrahousehold bargaining. He finds that among plots planted with the same crop in the same year, within a given household, those controlled by women produce lower yields than the men’s plots. This paper challenges that finding. Using an alternative nationally representative dataset, I find that only households in regions geographically proximate to those studied by Udry exhibit Pareto inefficient intrahousehold allocations, while the rest of the country reveals no evidence of Pareto inefficiencies. Households in regions experiencing negative rainfall shocks are on average less likely to exhibit Pareto inefficient intrahousehold allocations, and these negative rainfall shocks are correlated with increases in labor resources allocated to the wife’s plots, further confirming that in bad years, households try to avoid losses from Pareto inefficiency.

PDF icon Understanding Pareto Inefficient Intrahousehold Allocations

Coping With Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002

Dean Yang


How well do countries cope with the aftermath of natural disasters? In particular, do international financial flows help buffer countries in the wake of disasters? This paper focuses on hurricanes (one of the most common and destructive types of disasters), and examines the impact of hurricane exposure on resource flows to developing countries. Using meteorological data on storm paths, I construct a time-varying storm index that takes into account the fraction of a country’s population exposed to storms of varying intensities. Across developing countries, greater hurricane exposure leads to large increases in foreign aid. For other types of international financial flows, the impact of hurricanes varies according to income level. In the poorer half of the sample, hurricane exposure leads to substantial increases in migrants’ remittances, so that total inflows from all sources in the three years following hurricane exposure amount to roughly three-fourths of estimated damages. In the richer half of the sample, by contrast, hurricane exposure stimulates inflows of new lending from multilateral institutions, but offsetting declines in private financial flows are so large that the null hypothesis of zero damage replacement cannot be rejected.

PDF icon Coping With Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002

An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa

Todd Moss, et al.


A number of proposals today support a substantial increase in foreign aid levels to sub-Saharan Africa even though this region already receives a historically unprecedented volume of aid. This essay reviews the evidence regarding the potentially negative effects of aid dependence on state institutions, a topic which has received relatively little attention. We note several pathways through which political institutions might be adversely affected and devote particular attention to fiscal and state revenue issues. In addition to reviewing the economic literature on the aid-revenue relationship, this essay brings in the longstanding political science literature on state-building to consider the potential impact of aid dependence on the relationship between state and citizen. We conclude that states which can raise a substantial proportion of their revenues from the international community are less accountable to their citizens and under less pressure to maintain popular legitimacy. They are therefore less likely to have the incentives to cultivate and invest in effective public institutions. As a result, substantial increases in aid inflows over a sustained period could have a harmful effect on institutional development in sub-Saharan Africa.

PDF icon An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa