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Motivation

Motivation. Economists, IFIs emphasize policy recipes to achieve development goals. Eg: Washington Consensus reforms. IPES: Potential of policy recipes depends on quality of policymaking process (PMP) through which policies are discussed, approved, and implemented.

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Motivation

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  1. Motivation • Economists, IFIs emphasize policy recipes to achieve development goals. • Eg: Washington Consensus reforms. • IPES: Potential of policy recipes depends on quality of policymaking process (PMP) through which policies are discussed, approved, and implemented. • Improvement and better understanding of PMPs key in order to improve the quality of public policies.

  2. Beyond technocratic approach to policymaking • In technocratic approach, public policies are objects of choice. Policymakers just need to adopt those that lead to best outcomes. • Actual policymaking involves a multiplicity of political actors interacting in a variety of arenas. • Policies are outcome of inter-temporal transactions among them. • IPES: less emphasis on content of policies, more on process of policymaking (PMP), and some resulting policy features. • These processes differ across countries, can be traced back to each country’s political institutions. • While institutions are also endogenous, depend on culture and historical legacies, in IPES we treat them mostly as exogenous. • Focus on impact of existing institutions on policy outcomes, not on the dynamics of institutional change.

  3. Systemic approach with country focus • Policy outcomes do not depend on any single institutional dimension but rather on many factors, and their interaction. • We adopt systemic approach, which requires deep knowledge of institutional details of the countries under study. • Phase I of research agenda focused on detailed country studies, produced by local teams of economists and political scientists. • Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. • We have added Costa Rica, Guatemala and Jamaica.

  4. Key features of public policies • The focus of the approach is in explaining certain common features of public policies: • Stability. • Adaptability. • Coordination and coherence. • Quality of implementation and enforcement. • Orientation to public interest (public regardedness). • Efficiency. • These features may be more naturally linked to the institutional environment than the content of policies themselves.

  5. Measuring key features of policies • Two main sources of data • Global Competitiveness Report (GCR). • Our own State Capabilities Survey, responded by more than 150 experts in 18 countries in Latin America. • Time frame: last two decades (or since return of democracy). • Thus, our indices do not reflect quality of policymaking under current administrations, but during this longer period.

  6. Example: Measuring policy stability • Volatility of Fraser index of Economic Freedom. • GCR question regarding cost of legal and political changes for firm’s planning capacity. • GCR question on the extent to which new governments honor contractual commitments and obligations of previous regimes. • SC Survey question on capacity of the State to set and maintain policy priorities among conflicting objectives. • SC Survey question on extent to which governments ensure policy stability so that policies have time to work. • SC Survey question on extent to which the State makes and maintains international commitments.

  7. Policy Stability index Chile Uruguay Costa Rica Brazil Colombia Mexico El Salvador Honduras Panama Peru Dominican Rep. Paraguay Bolivia Nicaragua Guatemala Ecuador Argentina Venezuela 1 2 3 4 Stability Index (1-4 scale) Source: Authors’ compilations.

  8. Policy Stability index Chile Uruguay Costa Rica Brazil High Colombia Mexico El Salvador Honduras Panama Peru Dominican Rep. Medium Paraguay Bolivia Nicaragua Guatemala Ecuador Low Argentina Venezuela 1 2 3 4 Stability Index (1-4 scale) Source: Authors’ compilations.

  9. Country Stab Adapt Impl/Enf Coord / Coherence Public Reg Effic Policy Index Argentina L M L L M L L Bolivia M H M M M M M Brazil H H H H M M H Chile H H H H H H VH Colombia H H H M M M H Costa Rica H M H M H H H Dominican Rep M M M M L M M Ecuador L M L L L L L El Salvador H H H M M H H Guatemala M M L M L M L Honduras H M M M L M M Mexico H M H M M H H Nicaragua M M M L L M L Panama M L M L L L L Paraguay M L L L L L L Peru M M M M M M M Uruguay H H H M M M H Venezuela L L M L M L L Key features of public policy since 1980s

  10. Key features of public policy since 1980s Country Stab Adapt Impl/Enf Coord / Coherence Public Reg Effic Policy Index Argentina L M L L M L L Bolivia M H M M M M M Brazil H H H H M M H Chile H H H H H H VH Colombia H H H M M M H Costa Rica H M H M H H H Dominican Rep M M M M L M M Ecuador L M L L L L L El Salvador H H H M M H H Guatemala M M L M L M L Honduras H M M M L M M Mexico H M H M M H H Nicaragua M M M L L M L Panama M L M L L L L Paraguay M L L L L L L Peru M M M M M M M Uruguay H H H M M M H Venezuela L L M L M L L

  11. Key features of public policy since 1980s Country Stab Adapt Impl/Enf Coord / Coherence Public Reg Effic Policy Index Argentina L M L L M L L Bolivia M H M M M M M Brazil H H H H M M H Chile H H H H H H VH Colombia H H H M M M H Costa Rica H M H M H H H Dominican Rep M M M M L M M Ecuador L M L L L L L El Salvador H H H M M H H Guatemala M M L M L M L Honduras H M M M L M M Mexico H M H M M H H Nicaragua M M M L L M L Panama M L M L L L L Paraguay M L L L L L L Peru M M M M M M M Uruguay H H H M M M H Venezuela L L M L M L L

  12. The Policymaking Process (PMP) • Within our approach, the PMP takes center stage. Characterizing PMP in each country: • Which are the key actors that participate in it? • What powers and roles do these actors have? • What preferences, incentives and capabilities do they bring to the table? • What are the characteristics of the arenas in which they interact? • How frequent are these interactions? • What is the nature of the transactions they engage in?

  13. Actors and arenas in policymaking • Background papers study role of various actors and institutions in Latin America’s PMPs. • Political parties and party systems. • The legislature (and the legislators). • The president and his cabinet. • The bureaucracy and the judiciary. • Sub-national actors. • Business organizations, unions, social movements. • Articulation of technical expertise into the PMP. • Studies discuss formal and actual roles, interaction with other actors, incentives, policymaking capabilities.

  14. PMP  Policy outcomes • Key insight: features of public policies (such as stability, adaptability, etc) depend crucially on the ability of political actors to strike and enforce inter-temporal deals, and thus achieve cooperative outcomes. • Cooperation, in turn, depends on factors such as: • Number of actors with substantial impact on policy. • Temporal horizon (or discount rate) of actors. • Existence of well functioning arenas for political exchange (eg: institutionalized parties, a well-functioning legislature). • Credible enforcement technologies (eg, independent judiciary).

  15. Political Institutions  PMP • In turn, key aspects of the PMP are determined by the nature of the political institutions such as constitutional rules, electoral rules, etc, which determine (among others). • The number of actors and their roles • Their incentives • The rules of engagement among them • The nature of the arenas in which they interact

  16. Different looks at policymaking • IPES looks at links between political institutions, policymaking processes and policy outcomes from different angles. • Cross-sectional analysis (chapter 6) • Policymaking in action in specific countries (chapter 7) • Chile: Policymaking in an institutionalized setting • Colombia: the 1991 Constitution and the policymaking process • Brazil and Ecuador: Policymaking in fragmented party systems • Policymaking in specific sectors (chapters 8 – 11) • Tax policy • Public services • Education • Decentralization, budget processes, and feedback effects

  17. Some results from cross-section analysis • Partial equilibrium view, just to establish some associations between certain features of policy outcomes and certain institutional characteristics. • High-quality policies are associated with: • Congress with good policy capabilities • Political parties that are institutionalized and programmatic • Independent judiciaries • Strong bureaucracies

  18. Congressional Capabilities and the Quality of Policies 4.0 3.5 3.0 Policy Index (1-4 scale) 2.5 2.0 1.5 1.0 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 Congressional Capability Index (1-3 scale) Source: Authors' compilation.

  19. 8 Chile 7 Uruguay El Salvador 6 Policy Index = 2.57 5 Programmatic Index (0-8 scale) 4 Policy Index = 2.04 Policy Index = 2.06 3 Mexico 2 Brazil Argentina Honduras 1 Ecuador Paraguay Costa Rica Colombia Venezuela Dominican Rep. Guatemala Peru Panama Bolivia 0 40 50 60 70 80 Institutionalization Index (0-100 scale) Policy Index = "Very high" Policy Index = "High" Policy Index = "Medium" Policy Index = "Low" Note: Boxes show the average value of the Policy Index for the countries in each quadrant. Source: Authors' compilation and Jones (2005). Party System Institutionalization, Programmatic Orientation and the Quality of Policies

  20. Source: Authors' compilation and World Economic Forum (2004). Judicial Independence and the Quality of Policies 4.0 3.5 3.0 Policy Index (1- 4 Scale) 2.5 2.0 1.5 1.0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Judicial Independence Index (1-7 Scale)

  21. Source: Authors' compilation and Iacoviello and Zuvanic (2005). Development of Civil Service and the Quality of Policies 4.0 3.5 3.0 Policy Index (1- 4 scale) 2.5 2.0 1.5 1.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 Development of Civil Service System Index (0-1 scale)

  22. Congressional Capabilities Policy Stability 4.0 3.0 Policy Stability Index (1-4 scale) 2.0 1.0 1.0 1.5 2.0 2.5 3.0 Congress Capabilities Index (1-3 scale) Source: Stein and Tommasi (2005) and authors' compilation.

  23. Party System Institutionalization, Programmatic Orientation and Policy Stability 8 Chile 7 Uruguay El Salvador 6 Policy Stability Index = 3.03 5 Programmatic Index (0-8 scale) 4 Policy Stability Index = 2.43 Policy Stability Index = 2.25 3 Mexico 2 Brazil Argentina Honduras Costa Rica Bolivia 1 Ecuador Paraguay Venezuela Colombia Guatemala Peru Dominican Rep. Panama 0 40 50 60 70 80 Policy Stability = "High" Policy Stability = "Medium" Policy Stability = "Low" Institutionalization Index (0-100 scale) Note: Boxes show the average value of the Policy Stability Index for the countries in each quadrant. Source: Authors' compilation and Jones (2005).

  24. Judicial Independence and Policy Stability 4.0 3.0 Policy Stability Index (1-4 scale) 2.0 1.0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Judicial Independence Index (1-7 Scale) Source: Stein and Tommasi (2005) , World Economic Forum (2004) and Feld and Voigt (2003).

  25. Development of Civil Service and Policy Stability 4.0 3.0 Policy Stability Index (1-4 scale) 2.0 1.0 0.0 0.2 0.4 0.6 0.8 Index of Civil Service Development (0-1 scale) Source: Stein and Tommasi (2005) and authors’ compilation.

  26. Policymaking in fragmented party systems: Brazil and Ecuador • Most fragmented party systems in Latin America

  27. Political Party Fragmentation Brazil Ecuador Bolivia Colombia Venezuela Peru El Salvador Guatemala Argentina Costa Rica Panama Mexico Uruguay Paraguay Dominican Republic Nicaragua Honduras Chile 1 2 3 4 5 6 7 8 Effective Number of Legislative Parties Source: Jones (2005).

  28. Brazil and Ecuador: party system fragmentation 60 Chile Nicaragua Paraguay 50 Honduras Argentina Guatemala Uruguay Peru Dominican Republic Costa Rica 40 Panama Mexico President's Chamber Contingent Venezuela El Salvador 30 Bolivia Ecuador 20 Colombia Brazil 10 0 2 4 6 8 10 Effective Number of Parties Source: Jones (2005), Saiegh (2005).

  29. Policymaking in fragmented party systems: Brazil and Ecuador • Most fragmented party systems in Latin America • Strong presidential constitutional powers (to compensate for weak partisan powers)

  30. Presidential Legislative Powers Chile Brazil Ecuador Colombia Peru Argentina Panama Uruguay El Salvador Venezuela Guatemala Dominican Republic Honduras Mexico Bolivia Costa Rica Paraguay Nicaragua 0.0 0.2 0.4 0.6 0.8 1.0 Presidential Legislative Powers index (0-1 scale) Source: Payne and others (2002).

  31. Policymaking in fragmented party systems: Brazil and Ecuador • Most fragmented party systems in Latin America • Strong presidential constitutional powers (to compensate for weak partisan powers) • Legislators elected under similar electoral rules: open list, PR, incentives to deliver benefits to their jurisdictions.

  32. Policymaking in fragmented party systems: Brazil and Ecuador • Most fragmented party systems in Latin America • Strong presidential constitutional powers (to compensate for weak partisan powers) • Legislators elected under similar electoral rules: open list, PR, incentives to deliver benefits to their jurisdictions. • Yet completely different political and policy outcomes

  33. Key features of public policy and overall index Country Stab Adapt Impl/Enf Coord / Coherence Public Reg Effic Policy Index Argentina L M L L M L L Bolivia M H M M M M M Brazil H H H H M M H Chile H H H H H H VH Colombia H H H M M M H Costa Rica H M H M H H H Dominican Rep M M M M L M M Ecuador L M L L L L L El Salvador H H H M M H H Guatemala M M L M L M L Honduras H M M M L M M Mexico H M H M M H H Nicaragua M M M L L M L Panama M L M L L L L Paraguay M L L L L L L Peru M M M M M M M Uruguay H H H M M M H Venezuela L L M L M L L

  34. How can these differences be explained? • Substantial differences in capabilities of key institutions.

  35. Lower House Reelection Rates Chile (1993-2001) Uruguay (1989-99) Panama (1999) Brazil (1995-2002) Paraguay (1998-2003) Colombia (1990-98) El Salvador (2003) Ecuador (1996-2002) Bolivia (2002) Venezuela (1989-2004) Guatemala (1994-2004) Argentina (1989-2003) Peru (2001) 0 10 20 30 40 50 60 70 Rates of Immediate Reelection to the Lower House (percentage) Source: Saiegh (2005)

  36. Source: World Economic Forum (2004). Judicial Independence Index Uruguay Chile Brazil Costa Rica Dominican Rep. Mexico Colombia El Salvador Panama Guatemala Peru Honduras Ecuador Argentina Bolivia Nicaragua Paraguay Venezuela 1 2 3 4 5

  37. Source: Iacoviello and Zuvanic (2005). Index of Development of the Civil Service Brazil Chile Argentina Costa Rica Uruguay Colombia Mexico Venezuela Dominican Rep. Bolivia Guatemala Nicaragua Ecuador Peru Paraguay Honduras El Salvador Panama 0.0 0.2 0.4 0.6 0.8 1.0

  38. How can these differences be explained? • Substantial differences in capabilities of key institutions. • Presidents in Brazil have necessary tools to engage in political exchanges with other parties, and sustain coalitions in Congress.

  39. How can these differences be explained? • Substantial differences in capabilities of key institutions. • Presidents in Brazil have necessary tools to engage in political exchanges with other parties, and sustain coalitions in Congress • In Ecuador, coalitions are unstable, and tend to collapse as presidential terms progress and elections approach.

  40. Brazil: building coalitions • President needs to rely on coalition to pass his agenda. • Legislators need to deliver benefits to their communities, add budget amendments involving programs with local benefits. • Strong presidential powers, include discretional capacity to impound budgetary amendments. • President holds key for the legislators to deliver “pork”. • Key exchange is small investment projects in exchange for political support to pass the president’s agenda. • One of several inducements president uses to pass agenda in a fragmented system. Other is the allocation of ministries to coalition partners.

  41. Ecuador: ghost coalitions • Legislators have incentives to deliver pork to their communities, but geographically based items not allowed in the budget. • Ministries not a very valuable inducement, particularly toward end of the presidential period. • Being perceived as “gobiernista” is politically costly. Agreements between parties are viewed with distrust by society. • Politicians engage in “ghost coalitions”, provide legislative support in narrow set of issues in exchange for immediate benefits • They avoid visible and politically costly commitments, particularly towards the end of the presidential term.

  42. Ecuador: Size of Government’s Coalition in Congress over the presidential term (1984-2002) 60 50 40 Size of the President's coalition (percent) 30 20 10 1 5 9 13 17 21 25 29 33 37 41 45 Administration's months in office Source: Mejía-Acosta (2004).

  43. Ecuador: ghost coalitions • Legislators have incentives to deliver pork to their communities, but geographically based items not allowed in the budget. • Ministries not a very valuable inducement, particularly toward end of the presidential period. • Being perceived as “gobiernista” is politically costly. Agreements between parties are viewed with distrust by society. • Politicians engage in “ghost coalitions”, provide legislative support in narrow set of issues in exchange for immediate benefits • They avoid visible and politically costly commitments, particularly towards the end of the presidential term. • Result: unstable coalitions, conflict between the executive and the legislature, and a great deal of political instability.

  44. Ecuador: ghost coalitions • Legislators have incentives to deliver pork to their communities, but geographically based items not allowed in the budget. • Ministries not a very valuable inducement, particularly toward end of the presidential period. • Being perceived as “gobiernista” is politically costly. Agreements between parties are viewed with distrust by society. • Politicians engage in “ghost coalitions”, provide legislative support in narrow set of issues in exchange for immediate benefits • They avoid visible and politically costly commitments, particularly towards the end of the presidential term. • Result: unstable coalitions, conflict between the executive and the legislature, and a great deal of political instability. • Short time horizons, government interruptions reflected in quality and stability of public policies.

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