Policy Risk, Uncertainty, and Investment: Evidence from the English East India Company

Abstract : Governments can have large effects on investment by raising policy risks and uncertainty. This paper estimates their effects by studying the famous English East India Company. It had diffcult relations with some English governments and positive relations with others. This translated into either hostile or friendly policies. New time-series data on the Company's shipping and port capacity are used to analyze the effects of English governments and government changes on investment. Econometric results show that investment rates were lower in years with a new monarch and when elections changed the majority party in the House of Commons. Investment also differed depending on which monarch or majority party governed. This paper shows the relevance of policy risk and uncertainty over a long time-span, especially for companies involved in prominent public partnerships. It also illustrates the value of studying evolving policy risks in historical settings.

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Corruption and Legislature Size: Evidence from Brazil

Abstract : This paper studies the role of council size on government corruption in Brazil. We leverage on the discontinuous relationship between the population size of municipalities and council size dictated by the law to implement a regression discontinuity design. We document a substantial positive causal effect of the number of city councilors on the incidence of corruption detected during federal audits. Results also show that having an extra councilor does not affect the size of the public budget, but influences its composition. It increases expenditures related to public housing and recreation, which we interpret as items related to clientelistic policies. Finally, we find a negative relationship between council size and its productivity: namely, the numbers of legislative bills proposed by councilor and approved are both lower in municipalities with larger councils.

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The Political Transaction Costs of Public Contracts: Empirical Evidence from the Us Electric Utility Sector Before and After the Deregulation

Abstract : Recent research suggests that public contracts can be expensive and inefficient compared to pure private contracts (Moszoro and Spiller 2014). This research studies empirically the intrinsic difference between public contracts and private contracts in the U.S. electric utility sector. Prior to the deregulation in 1996, the energy power market was dominated by vertically integrated utilities that perform three functions, i.e. electric generation, power transmission, and power distribution. After the deregulation, power generator and sales industries are being untangled from transmission and distribution services, with the presence of a high number of independent power producer (IPP). While de-integrated utilities might be necessary to foster competition and avoid monopolies, however, it may undermine the economies of coordination among vertical stages of electricity production. When utilities have to buy power from IPPs, they may face higher transaction costs due to the contractual relationships. This research assesses how the deregulation affects the economic performance of the investor-owned utilities (IOUs) and the publicly owned utilities (POUs) differently through the effect of transaction costs, i.e. the costs of doing a transaction with IPPs. This research will employ a two-stage empirical strategy. The first stage is to use data envelopment analysis (DEA) techniques to measure the output-oriented technical efficiency of the utilities. The second stage is to use difference-in-differences (DD) regression estimation to measure the differences in the economic performance of divesting IOUs and non-generator POUs compared to the vertically integrated IOUs and POUs. The difference will represent the treatment effect, in this case, the difference in transaction costs that the POUs and IOUs faced due to the deregulation.

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