arbetman-rabinowitz johnson 2007 relative political capacity

Claremont Conference on Political Economy Indicators

Marina Arbetman RabinowitzKristin Johnson

Relative Political Capacity: New Models

& Data Updates


Indicators of Political Development Indicators of Well being:

Electricity, calories per capita, education, health, etc. Deutsch (1966), Rokkan (1970), Gurr (1974), World Handbook of Social Indicators (WB), Human Development Index (UN), Millennium Development Goals.

Democracy Research: Participation, representation, electoral choice, institutions, bureaucracy (Campbell, Converse, Stokes and Miller, 1960; Verba, Nie and Petrocik, 1972; and Fiorina, 1981). Freedom House Index, Polity IV (democracy/ autocracy), Governance Indicators.


Theoretical issues These approaches each fall into the trap of measuring the consequences or reflecting phenomena other than capabilities but have the advantage of measuring the phenomena directly.

Measures of well being reflect government and elite choice in resource allocation

Measures of governance favor democratic systems of government over other forms of governance.


Relative Political CapacityMeasures the discretionary power of the government to

implement a desired policy.

The Relative Political Capacity of a government is the ratio of revenues a government extracts, compared to predicted levels a society could attain based on economic endowment.

RPC = Actual Government Revenue Predicted Government Revenue


Relative Political Capacity

Predicted Performance

Boundary of High Performance

RA

TIO

OF

R

EV

EN

UE

T

O G

DP

Fragile States

Successful States

Boundary of Low Performance

Poor Developing Developed


Examples: RPC across time

1960

1970

1980

1990

20002005

1960 19701980

19902000

2005

1970

1980

1990

2000

2005

0 2000 4000 6000 8000

GDP per Capita

Angola

1960 19701980

1990

2000

2005

High RPC

Low RPC

Bolivia

Thailand

Botswana


RPC 2000

Argentina

Austria

Bangladesh

Barbados

Bolivia

Brazil

Burkina Faso

DenmarkEcuador

Fiji

Finland

Gabon

Greece

Haiti

Hungary

Indonesia

Iran

Israel

Jordan

Kenya

South Korea

Kuwait

Lesotho

Malaysia

Malta

Mauritius

Morocco

Myanmar

New Zealand

Papua New Guinea

Paraguay

Philippines

Poland

Portugal

Singapore

Sri Lanka

Sweden

Thailand

Tunisia

Uruguay

USA

Income0 40,000

po

sit

ive

0

ne

ga

tiv

eR

PC


RPE General Model

Yit = α + β Xit + Vr

Yit = Adjusted tax revenue for country i at time t

X it = Vector of variables that determine potential tax collection

Vr= White noise disturbance


Inter country comparisons:Models for Developing SocietiesModel 1: Tax/Gdp= α + β1 time - β2 min/gdp + β3 gdpCap + β4 exports/gdp

+ β5 Oil + ξ

Tax= (TaxRev-NonTax-SocSec)/Gdp

RPC1 = Real /Predicted Note: Control for expenditures

Model 2: Tax/Gdp= α + β1 time - β2 min/Gdp + β3 agr/Gdp + β4 exports/Gdp

+ β5 Oil + ξ

Tax= (TaxRev-NonTax-SocSec)/GdpRPC2 = Real /Predicted


Inter country comparisons:Models for Developed SocietiesModel 3:Tax/Gdp= α + β1 time - β2 min/gdp + β3 gdpCap + β4

Exports/gdp + β5 health/gdp + ξ

Tax= (TaxRev-NonTax-SocSec)/GdpRPC3 = Real /Predicted


Empirical Inventory National Level model

Unit of analysis: country

Number of countries in the sample: 129

Time span: 1960-2005

Notes: Sample includes Poland 86-on, Hungary 89-on, Romania 88 on. These countries use NMP in their National Accounts before those dates so the data is not comparable to GNP/GDP methodology). The sample includes China.


Variables & Sourcescountry Country Name

year 1960 - 2004

totrev Total revenue divided by GDP*: Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

nontax Non tax revenue divided by GDP*. Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

socsec Social security revenues divided by GDP*. Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

agri Agriculture GDP divided by total GDP*. Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

exp Exports divided by total GDP*. Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

mining Mining production GDP divided by total GDP*. Main Source GFS, IMF 1972-2005; World Bank 1960 – 1972, Where data was missing we used overlapping series and National Sources.

Realgdp Real GDP per capita in constant dollars. Main Source: Penn World Tables, Summers & Heston, additional sources include the IMF GFS & World Bank, World Development Indicators. Where data was lacking we used national sources.

taxratio Totrev – nontax - socsec

Oil Oil Exports/total exports. Main Source: Direction of Trade Statistics.


Data relies on national government accounts

Variances in tax reporting and accounting are noted by IMF or WB, in most cases.

Currency changes and differences in reporting timing in high inflation situations need to be normalized.

National sources may be necessary to supplement

Data Collection Issues


Health expenditures: before 1990s mostly government reported public expenditures, now private are part of the mix in both developed and developing but not always reported

Social Security: 1) some countries have privatized part of SS. 2) The argument to exclude social security has been that those transfers have been allocated previous to the collection and therefore there is little room for any further manipulation by the government. This is not the case, those funds are not untouchable, and the deficit can be manipulated by Central Banks or Congress

Agriculture: Still our best empirical fit for developing countries (not for developed) but 1960s is the anchor so we need to control for time.

Taxation: Indirect vs. direct taxation

Measurement & Conceptualization


Yit = α + β Xit + Vr Yit = Adjusted tax revenue for country i at time t

X it = Vector of variables that determine potential tax collection

Vr= White noise disturbance

o Conceptually, the same model as national level.o Constraints to choosing the variables are country

specific

Sub National Models


Relative Provincial Political Capacity (RPPC)Model 1:Transf/gdp = α + β1 time + β2 min/gdp + β3 agr/gdp + β4

rev/gdp + ξ

Model 2: Transf/gdp= α + β1 time + β2 gdpCap + β3 rev/gdp + β4

min/gdp + ξ

Model 3:Rev/gdp= α + β1 time + β2 transf/gdp + β3 agr/gdp + β4

min/gdp + + β5 Subsidies+ ξ


Empirical Inventory Sub National Level Model

Unit of analysis: province/state/region

Time span: Ideally 1990 – 2005, dependant on individual country

Bolivia, Brazil, China, EU, India, Indonesia, Iran, Mexico, Nigeria, Thailand, Sudan, USA,


Data Collection In many countries the transfers are decided according to a

Congressional Allocation Funds formula. If the allocations are decided on annual negotiations (1), the variable captures the concept of RPPC. If the formula is inflexible (2), the flexibility comes from the allocation of central government expenditures to the provinces.

It is also important to know that the General Appropriation Act does not show if or how much of the money is released, so instead of following to entry number (Transfers, Subsidies. Models 1& 3) in some cases is better to look at the exit number (Expenditures. Model 2)


province state province name State name

Year 1980-2005

Code 2 digit codes except for split provinces (3rd digit added for identification)

Split 1 or 0 for provinces that have not split

Population number of people reported in census

Totrev * Includes 1.Surplus + 2. Local Gov Original Receipts + 3. Balanced Budget + 4. Local Gov. Loans

Localrev Taxes collected by the local government from the local population

Transfers transfers, from General Allocation Fund

Transf_gdp Transfers divided by total GDP*

Expend_gdp Expenditures divided by total GDP*

Grdp constant YEAR gross regional domestic product in constant YEAR prices in local currency

Grdp market gross regional domestic product at market prices in local currency

agriculture Agriculture GDP divided by total GDP*

mining Mining production GDP divided by total GDP*

Oil Production Dummy or % oil produced/Total country production

RPC1 controlling for agriculture (specify all variables used in the model)

RPC2 controlling for gdp per capita (specify all variables used in the model)

Variables: RPPC


Sources Examples: RPPCExpend_gdp Main Source: Statistical Center of Iran, available at:

http://www.sci.org.ir/english/default.htm

agriculture Main Source: Statistical Center of Iran, available at: http://www.sci.org.ir/english/default.htm

mining Main Source: Statistical Center of Iran, available at: http://www.sci.org.ir/english/default.htm

Rev_gdp Main Source: Economic & Financial Review, The Central Bank of Nigeria 1979 – 1987; ISSN: 008-9281; Central Bank of Nigeria, Annual Report & Statement of Accounts. 1980 – 2005. ISSN: 0069-1577

agriculture Main Source: Economic & Financial Review, The Central Bank of Nigeria 1979 – 1987; ISSN: 008-9281; Central Bank of Nigeria, Annual Report & Statement of Accounts. 1980 – 2005. ISSN: 0069-1577. When data was lacking, overlapping series were obtained from FAO Statistics available from the UN.

mining Main Source: Economic & Financial Review, The Central Bank of Nigeria 1979 – 1987; ISSN: 008-9281; Central Bank of Nigeria, Annual Report & Statement of Accounts. 1980 – 2005. ISSN: 0069-1577


Applications International Conflict

Organski & Kugler 1980; Lemke 1996; Tammen et al 2002. Internal Conflict

Kugler et al 1997; Benson & Kugler 1998; Johnson 2007. Demographic Transitions

Arbetman, Kugler & Organski 1980, 1994, 1999; Feng Kugler & Zak 2000, 2007.

Economic Applications Exchange Rates: Arbetman 1990; Growth: Leblang 1997;

Inflation: Alcazar 1997; Private Investment: Feng & Chen 1997, Feng 2004; Policy Implementation: Snider 1997; Informal Markets: Arbetman 1990, 1994; Arbetman & Ghosh 1997.

Sub National Rouyer 1997; Swaminanthan 2005; 2007; Johnson 2007.


RPC at different levels of development

Poor Developing Developed

_

+

Predicted Performance

Very Low

Very High

Average

High

Low

Relative Political Capacity

arbetman-rabinowitz johnson 2007 relative political capacity

Documents

relative political

political

main source

inter country

annual report

main source

total gdp

economic amp