Democratic Governance and Economic Performance (eBook)

Preface 7
A Note on Method 9
Overview of the Book 10
References 12
Acknowledgments 14
Contents 15
About the Author 18
A General Theory and Statistical Evidence 19
Theory 20
1.1 Output, Not Price, Reflects Economic Performance 21
1.2 Robustness to Assumptions 25
1.3 Conclusion and a Look Ahead 28
References 29
Natural Experiments 31
2.1 General Requirements for a Natural Experiment 32
2.2 Experimental Conditions in the Telecommunications Sector 33
2.3 What ShouldWe See if Democratic Governance Goes Too Far in This Application? 34
2.4 Conclusion 36
References 37
Statistical Evidence 39
3.1 An Empirical Proxy for Economic Performance 40
3.2 Proxies for Democratic Governance 43
3.3 From Correlation to Evidence of Causation 47
3.4 Conclusion 57
3.5 Appendix A 58
3.6 Appendix B 59
3.7 Appendix C 61
References 62
Implications for Political Bureaucracy, Competition Law, and Business Organization 65
Politics 66
4.1 Electoral Accountability Can Weaken Policy Commitments: The Case of Monetary Policy 67
4.2 Electoral Accountability Can Fuel Redistributive Pressures 75
4.3 Conclusion: When Can Policy Benefit from Undemocratic Processes? 81
References 82
Law 84
5.1 Competition Policy Can Strengthen Economic Performance 85
5.2 But Legal Ideals MustWork Within Political Constraints 86
5.3 Case Study: Do Consumer InterestsWeigh Too Heavily on Insurance Regulation? 90
5.4 Tail Risks and Term Limits 102
5.5 How Big Is This Problem? 105
5.6 Governance Opportunities 106
References 109
Business 112
6.1 Widespread Support for Increasing Accountability to Shareholders 113
6.2 Strengthening Shareholder Democracy: Policy Developments 115
6.3 Can Accountability to Shareholders Go Too Far? 116
6.4 Diffuse OwnershipWeakens Shareholder Democracy, but Strengthens Commitments Against Opportunism 121
6.5 Evidence on HowWeakening Shareholder Democracy Can Improve Corporate Performance 122
6.6 Quandaries in Macro- and Micro-governance 127
Appendix 1: Formal Overview of Holmstrom's Result 128
Appendix 2: Golden Parachute Agreement for Ameren Corporation 129
References 130
Conclusion 132
References 135
Index 136