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Vote-seeking incentives and investment environments: The need for credit claiming and the provision of protectionism

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Abstract

Incentives to cultivate a personal reputation encourage legislators to generate policy outcomes for which they can claim credit. We show that these incentives make themselves felt in international agreements – a domain that might typically be considered within the purview of the executive branch. Through a cross-national analysis and brief case studies, we show that countries with electoral systems that encourage personal vote seeking are more likely to negotiate exceptions to treaties meant to liberalize their investment environments. Legislators benefit by being able to claim credit for having protected their constituents from the competition an unrestricted agreement would entail.

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... Most modern trade agreements—in particular US trade agreements and WTO and EU accession or treaties—entail extensive requirements that go far beyond the traditional objective of reducing barriers to trade, such as tariff rates and import quotas, often calling for developing countries or transition economies to modernize their legal and institutional frameworks. To bring rules, regulations, and administrative procedures more in line with international best practices requires a commitment to legislative and regulatory transparency, due process, arm's-length regulation applied equally to all firms, administrative review, and formal dispute settlement through arbitration and the courts (Crisp et al. 2010). ...
... " Thus, we expect that implementation of regulatory reforms that are inspired by international agreements will reduce corruption. An important feature of such domestic reforms, however, is that they are rarely applied universally to the entire economy (Crisp et al. 2010). Rather, deep negotiations take place over particular sectors and phase-in periods are allowed in sectors where reform is most difficult. ...
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... Notable exceptions include Allee and Peinhardt (2010),Crisp et al. (2010) andPoulsen (2010). ...
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... Bagashka (2012) argues that economic reforms are less likely under electoral rules that facilitate personal vote seeking. Crisp et al. (2010) show that in countries with electoral systems that encourage personal votes we see more negotiated exceptions in international treaties aimed at liberalizing markets. ...
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Correcting the relative lack of attention to the supply side of trade policy, this article addresses how political institutions channel societal demands for protection. I hypothesize that strong presidents with significant legislative powers and strong party leaders—empowered through electoral rules that rein in the personal vote—can help overcome protectionist biases. These arguments compare with two institutional alternatives: first, that protectionism should decrease as electoral district size grows because elections become more proportional; and second, that the collective-action problems in fragmented party systems thwart trade reform. I evaluate these hypotheses empirically using pooled time-series–cross-sectional data involving 18 developing countries from 1971 to 1997. I find that delegation to presidents and party leaders is significantly related to trade liberalization, and some evidence suggests that the effective number of parties and the size of electoral districts may also influence levels of protectionism.
Article
Almost all legislators are subordinate to party leadership within their assemblies. Institutional factors shape whether, and to what degree, legislators are also subject to pressure from other principals whose demands may conflict with those of party leaders. This article presents a set of hypotheses on the nature of competing pressures driven by formal political institutions and tests the hypotheses against a new dataset of legislative votes from across 19 different countries. Voting unity is lower where legislators are elected under rules that provide for intraparty competition than where party lists are closed, marginally lower in federal than unitary systems, and the effects on party unity of being in government differ in parliamentary versus presidential systems. In the former, governing parties are more unified than the opposition, win more, and suffer fewer losses due to disunity. In systems with elected presidents, governing parties experience no such boosts in floor unity, and their legislative losses are more apt to result from cross-voting.
Article
The job description for legislators in western democracies includes constituency-focused activities such as casework and district visits. Unfortunately we have a limited theoretical and empirical understanding of the factors affecting legislators' constituency-oriented activities, in large part because most studies focus on single nations; even studies that are comparative do not span a variety of electoral systems. In this article we examine the constituency focus of MPs in six chambers that do provide such variance: the Australian House and Senate, Canadian House, Irish Dáil, New Zealand House, and the British House of Commons. We find that electoral considerations and incentives provided by different electoral systems, as well as other factors, affect the priority that MPs place on constituency service.
Article
This paper uses a large panel of OECD data on stocks of outward foreign direct investment (FDI) to evaluate the impact of bilateral investment treaties. For several variants of the knowledge capital model of multinationals, we demonstrate that investment treaties exert a significant positive effect on outward FDI, if they actually are implemented. Moreover, even signing a treaty has a positive, although lower and in most specifications insignificant, effect on FDI. Journal of Comparative Economics32 (4) (2004) 788–804.
Article
World Development Indicators, the World Bank's respected statistical publication presents the most current and accurate information on global development on both a national level and aggregated globally. This information allows readers to monitor the progress made toward meeting the goals endorsed by the United Nations and its member countries, the World Bank, and a host of partner organizations in September 2001 in their Millennium Development Goals. The print edition of World Development Indicators 2005 allows you to consult over 80 tables and over 800 indicators for 152 economies and 14 country groups, as well as basic indicators for a further 55 economies. There are key indicators for the latest year available, important regional data, and income group analysis. The report contains six thematic presentations of analytical commentary covering: World View, People, Environment, Economy, States and Markets, and Global Links.
Article
Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. Their proliferation over the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. How can we explain the diffusion of BITs? We argue that the spread of BITs is driven by international competition among potential host countries - typically developing countries - for foreign direct investment. We design and test three different measures of economic competition. We also look for indirect evidence of competitive pressures on the host to sign BITs. The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so. We find some evidence that coercion plays a role, but less support for learning or cultural explanations. Our main finding is that diffusion in this case is associated with competitive economic pressures among developing countries to capture a share of foreign investment. We are agnostic at this point about the benefits of this competition for development.
Article
Domestic politics and international relations are often inextricably entangled, but existing theories (particularly “state-centric” theories) do not adequately account for these linkages. When national leaders must win ratification (formal or informal) from their constituents for an international agreement, their negotiating behavior reflects the simultaneous imperatives of both a domestic political game and an international game. Using illustrations from Western economic summitry, the Panama Canal and Versailles Treaty negotiations, IMF stabilization programs, the European Community, and many other diplomatic contexts, this article offers a theory of ratification. It addresses the role of domestic preferences and coalitions, domestic political institutions and practices, the strategies and tactics of negotiators, uncertainty, the domestic reverberation of international pressures, and the interests of the chief negotiator. This theory of “two-level games” may also be applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.
Article
Bilateral Investment Treaty’s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective.
Article
A serious analysis of Bilateral Investment Treaties (BITs) and their implications for both investment levels and the distribution of the gains from investment is timely. BITs have become the dominant international vehicle through which investment is regulated.
Article
This paper examines the importance of electoral rules for legislators' behavior. The German electoral system includes a mechanism which assigns whether legislators are elected under the "first-past-the-post" (FPTP), or the proportional representation (PR) electoral rule. Using this institution, we identify the effect of electoral rules on legislators' behavior and disentangle whether so-called pork barrel politics are due to political climate in a country or due to the electoral rule employed. We find significant differences in committee membership, depending whether the legislator is elected though FPTP or PR. legislators elected through FPTP system are members of committees that allows them to service their geographically based constituency. Legislators elected through PR are members of committees that service the party constituencies, which are not necessarily geographically based.
Article
Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. The proliferation of BITs during the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. How can we explain the widespread adoption of BITs? We argue that the spread of BITs is driven by international competition among potential host countries typically developing countries for foreign direct investment. We propose a set of hypotheses that derive from such an explanation and develop a set of empirical tests that rely on network measures of economic competition as well as more indirect evidence of competitive pressures on the host to sign BITs. The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so. We find some evidence that coercion and learning play a role, but less support for cultural explanations based on emulation. Our main finding is that the diffusion of BITs is associated with competitive economic pressures among developing countries to capture a share of foreign investment. We are agnostic at this point about the benefits of this competition for development.For useful comments on earlier drafts of this article, we thank Bill Bernhard, Bear Braumoeller, Frank Dobbin, Robert Franzese, Jeffry Frieden, Geoffrey Garrett, Tom Ginsburg, Jude Hays, Lisa Martin, Bob Pahre, Mark Ramsayer, Steven Ratner, Susan Rose-Ackerman, and John Sides. For research assistance, we thank Elizabeth Burden, Raechel Groom, and Alexander Noonan.
The database of electoral systems and personal vote Available from Democratic politics and international trade negotiations: elections as constraints on trade liberalization
  • J W Johnson
  • J S Wallack
Johnson, J.W., Wallack, J.S., 2005. The database of electoral systems and personal vote. Available from. http://dss.ucsd.edu/~jwjohnso/espv. htm. Milner, H.V., Rosendorff, B.P., 1997. Democratic politics and international trade negotiations: elections as constraints on trade liberalization. The Journal of Conflict Resolution 41 (1), 117–146.
The Strategy of Conflict Who is powerful? Examining preferences and testing sources of bargaining strength at European intergovernmental conference
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Schelling, T.C., 1960. The Strategy of Conflict. Harvard University Press, Cambridge, MA. Slapin, J.B., 2006. Who is powerful? Examining preferences and testing sources of bargaining strength at European intergovernmental conference. European Politics 7 (1), 51–76.
Not the least BIT rational: an empirical test of the 'rational design' of investment treaties. Working Paper A comparative theory of electoral incentives: representing the unorganized under PR, plurality, and mixed-member electoral systems
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  • C Peinhardt
Allee, T. & Peinhardt, C. 2008. Not the least BIT rational: an empirical test of the 'rational design' of investment treaties. Working Paper. Bawn, K., Thies, M.F., 2003. A comparative theory of electoral incentives: representing the unorganized under PR, plurality, and mixed-member electoral systems. Journal of Theoretical Politic 15 (1), 5–32.
The Personal Vote: Constitu-ency Service and Electoral Independence Competing principals, political institutions, and party unity in legislative voting
  • B E Cain
  • J A Ferejohn
  • M P Fiorina
Cain, B.E., Ferejohn, J.A., Fiorina, M.P., 1987. The Personal Vote: Constitu-ency Service and Electoral Independence. Harvard University Press, Cambridge, MA. Carey, J.M., 2007. Competing principals, political institutions, and party unity in legislative voting. American Journal of Political Science 51 (1), 92–107.
The database of electoral systems and personal vote
  • J W Johnson
  • J S Wallack
Johnson, J.W., Wallack, J.S., 2005. The database of electoral systems and personal vote. Available from. http://dss.ucsd.edu/~jwjohnso/espv. htm.
Not the least BIT rational: an empirical test of the ‘rational design’ of investment treaties
  • T Allee
  • C Peinhardt
Allee, T. & Peinhardt, C. 2008. Not the least BIT rational: an empirical test of the 'rational design' of investment treaties. Working Paper.
Who is powerful? Examining preferences and testing sources of bargaining strength at European intergovernmental conference
  • Slapin
Slapin, J.B., 2006. Who is powerful? Examining preferences and testing sources of bargaining strength at European intergovernmental conference. European Politics 7 (1), 51-76.