Blogging has been very light lately, but I wanted to make a couple of quick points about outsourcing.

Oddly enough, the topic of outsourcing seems to be correlated with the electoral calendar.  Academics are quick to point out that the public (and media) often conflate “outsourcing” with “offshoring”.  Fair enough.  But for the sake of brevity let me just focus on “offshore outsourcing”.

Rather than rehash the same simple debates, I though I would point out a few great pieces on outsourcing by academics.  While most of the studies suggest that outsourcing is either a pretty minor issue, or that it has net benefits, there is some nuance in these studies.

A good starting point on the politics of outsourcing is Dan Drezner’s piece and Greg Mankiw’s (long and gated) take on the inside politics of outsourcing.  Some of you may remember that Mankiw basically lost his job as a Bush economic advisor due to some positive comments about outsourcing.  Matt Yglesias has some commentary on the recent Obama-Romney back and forth on outsourcing.  Here is one piece.

What does the academic literature say about outsourcing?  One classic research design is to examine outsourcing at the firm level.  What types of firms outsource?  Do they increase or decrease employment?  In a 2009 American Economic Review piece, Desai, Foley and Hines find that greater expansion abroad by us firms was associated with greater investment and employment at home.   See here for an ungated version.

Ann Harrison and Margaret McMillian have a couple of interesting projects on the topic, and have different findings from the Desai et al piece.  They find that while outsourcing to rich countries can lead to employment creation at home, outsourcing to developing countries has a negative impact on domestic.  For a very readable summary of the previous literature and some new evidence, see this paper.

While I have no doubt that the current debate is driven by politics, it doesn’t mean we can’t use this as an opportunity to have a serious debate on the topic.  My personal take is that outsourcing has a pretty modest impact on US workers (positive or negative) and that any policy interventions to limit outsourcing would most likely have greater negative consequences than they would generate benefits.  For example, I’ve brought up Ted Moran’s work in previous posts.  Moran finds that countries that used “domestic content requirements” or requirements on hiring local workers often coupled these policies with tax incentives or policies to help protect these firms from competition (trade protection).  The net benefits for society were negative, despite the positive ring of using local suppliers and hiring local workers.

The work of Moran was based on the evidence of foreign firms entering into to new markets.  I think there is more limited evidence on how governments can create jobs by harnessing the potential benefits or mitigating the negatives of outsourcing.

1.  Not all expropriations generate revenues.  Government supports sugar industry in Sri Lanka.

2.  Guatemalan President insists new 40% state ownership in mining investments isn’t expropriation.

3.  Glencore mining operations nationalized in Bolivia.

4.  Hungary wins investment arbitration case.

5.  Indonesia goes to court over $2 billion mining dispute.

6.  Debates on mining nationalization in South Africa.

The recent announcement that Airbus will open there first US manufacturing facility in Mobile, Alabama intersects a couple of areas of interest.  A few quick points.

1. The state of Alabama and city of Mobile offered lots of economic incentives to lure this investment.  The grand total is expected to be $158 million for 1,000 jobs ($158,000 per direct jobs).  I’ve talked to people in state economic development over the years and they often claim that the indirect jobs for certain types of manufacturing are much greater than the direct jobs.  The estimates for auto production is that that each auto production job producers another 7-8 upstream or downstream jobs.   But this is a very large incentive package.
2. Boeing and Airbus have been in a nasty competition over the years.  This goes beyond commercial aircraft to a controversy over a refueling tanker.  Airbus originally won the contract but this was eventually overturned and the contract was given to Boeing.

3. Boeing and Airbus have been in constant WTO disputes.  The short of it is that both Boeing and Airbus have been receiving subsidies inconsistent with WTO rules.  Great blog post with some links on the most recent dispute.

There is some really interesting political science and economics research that has examined how inward investment affects domestic politics.  The short of it is that foreign investment can be used to “jump” trade protection.  This classic example is Japanese automobile investment.

This investment can also defuse trade protection or other forms of legislation that could be harmful to the company’s interests.  See here for a great paper on the topic (gated).

The short of it is, this seems like a shrewd (and costly) political strategy for Airbus.  Building aircraft in the US will certainly give the company a few political allies in the United States, and could help open doors for government procurement contracts in the future.

I have a bunch of work in progress with Eddy Malesky (and one paper with Mariana Medina and Ugur Ozdemir) on the politics of offering financial incentives to attract investment.  Our main argument is politicians use these incentives to claim credit (or minimize blame) for investment (or lack of investment).

This post offers a quick bit of descriptive data, mostly focusing on the question of the job creating elements of these incentives in the United States.  I’m drawing on some of the data from ICA Incentives (subscription required)

Over the last 2 years US states and localities (along with some federal programs) have provided investment incentives for over 4,000 investments. This week there were a total 79 new incentives announced.  A couple of these new incentives caught my eye.

There are a bunch of big incentive packages offered to firms, often by states desperate to create and maintain jobs.  How do we calculate the net benefits and if the incentive is worth it?  One way to measure jobs, but this is complicated.

For example, G&W electric was offered an incentive package to locate in Bolingbrooke, Il.  Only 30 news jobs will be created (at the cost of $250,000 per new job).  But the company claims that this incentive package will help the company retain 400 jobs in the Chicago area along with the 30 new jobs ($17,500 per job).  Similar complications arise if we examine Leanwee Stamping Corporation’s Tecumseh, Michigan investment ($10.40 million incentive for 46 new jobs and 425 jobs retained), Cablevision and Burlington Coat Factory’s decisions to remain in New Jersey have similar issues ($37.50 million incentive for 574 jobs retained and $41 million for 676 retained jobs plus 120 new jobs respectively).

This may sound like I’m cherry picking the extreme cases, but these are pretty representative of the major incentive deals.  The total database (including investments in Europe and a few other places) includes over 5,000 deals with an excess of $40 billion in incentives over the past two years.  The average per (new) job is $58,000.

Another interesting set of cases are the many controversial film tax credit programs that states offer.  This week a French movie production company, Why Not Productions, received a $1.96 million grant for 35 jobs from the State of Michigan.  This brings the total of incentives for this company to over $14 million for the creation of just over 200 full time jobs.  Not only is this a high dollar per job created ($68,000), but I’m also skeptical of the long run impact of impact.  After this production, how many jobs will remain?

I could go on and on, but this is just one week of incentives.  The point is that the cost-benefit analysis of these incentive are problematic for a couple of reasons.

1. How should a government weigh the benefits of creating new jobs and job retention?  For some firms (solar power), the job creation aspect may be secondary to other aspects of the investment.  What info should we use to make a cost-benefit analysis?
2. Firms can threaten to move in order to extract high levels of incentives.  Many of the large incentive packages are motivated for the purpose of job retention.  Would they actually move without the incentives?
3. These incentive programs make headlines for their short-run impact, but it isn’t clear how valuable these investments are in the long run.  Obviously film tax credits fit this pattern.  But many other projects, like wind farms, generate a bunch of construction jobs up front, but they retain very few jobs in the long-run.

Ok, thus far I’ve tried to point out that calculating the net benefits to a state or city seem very difficult.

While many of these incentive programs are based on formal incentive programs,  others required special legislation.  Some states actually have slush funds (State “Deal Closing Funds”) specifically for this purpose.  This leads to my final point.

4.  Politicians retain a great deal of discretion in their offering of incentives.

I am concerned about the lack of attention to these programs.  They are costly, difficult to evaluate their effectiveness, and politicians have a ton of discretion in their use.  At the very least, it seems like a topic looking at more closely.

In the previous blog post I presented US survey results on public support for agriculture policy.  I note that most American’s don’t know that US agriculture policy tends to be less generous than many other developed countries.  Cross country comparisons are difficult, but serious effort has been made to examine how agriculture policies affect both producers (Producer Support Estimates) and consumers (Consumer Support Estimates).  Again, see here for a great book on the topic.

In the previous blog post I examined how the inclusion of food stamps affect public opinion.  Food stamps have a modest impact on public opinion and the bigger story was one of partisanship.  Democrats and independents were more supportive of agriculture policy when we included information on food stamps.  Republicans were less supportive.

In this post I address how the size of US agriculture support relative to other countries affects public opinion on US agriculture policy.

For our this question we primed ½ of the respondents with a statement (question 2A).  We presented US agriculture policy as more generous than other countries:

Q2A:  Countries around the world provide different types of support for farmers, including financial payments to farmers.  U.S. farm payments are generally more generous than those of foreign countries such as Canada, Australia and New Zealand.

The other ½ were given a prime describing the US policy as less generous than other countries.  Note that these are both truthful descriptions of the relative position of US farm policy.

Q2B:  U.S. farm payments are generally less generous than those of foreign countries such as France, Japan, and Italy.

Then we asked all respondents:

Which of the following statements best describes your opinion?

1. The U.S. should increase farm payments
2. The U.S. should decrease farm payments

Increases or Decreases in Agriculture Support

This table gives a quick snapshop of aggegrate support for spending increases or decreases.  Democrats like more spending, Republicans like less.  Nothing too surprising here.

How does framing the US as being more or less generous in their agriculture policies affect support for agriculture spending?  Excluding don’t know responses (or individuals who skipped the question), only 40% of respondents supported increases in agriculture when they are primed with info on agriculture being more generous in the US.  Support for ag spending rises dramatic with the other prime, where 59.27% of respondents support increases when the US is framed as providing less generous support.

While Democrats and Republicans have different baseline levels of support, both groups respond the same way.  Frame the US as less generous than other countries and Republican support for increased spending rises from 30.33% to 45.88%.  Democrats jump from 52.89% to 75.74%.

What is the takeaway point from this discussion?  This echoes Paul Krugman’s book, “Pop Internationalism.”  Politicians often use the language of competition to sell policies.  The evidence here suggests that framing US agriculture less generous than (select) other countries is an effective strategy for increasing support for agriculture policy.  And the impact is very large. 15-20%.

If this was a research paper I’d end this with some caveats about the limits to this methodology or cheap talk about future research.  But I think there are some broader implications here.  I’ve been trying to get my head around US agriculture policy for years, and making comparisons across countries is difficult.  The complex lumping of price supports, insurance, conservation programs, school lunch programs, and food stamps further increases the complexity of examining these program.  This complexity makes it hard for academic researchers, much less even the most informed voter, to understand these programs.  Some issues are inherently complex.  Other can be made purposely complex by incumbent politicians, and this complexity can be exploited.  I fear agriculture policy is the latter.

One final question to my sole reader.  Hi mom.  Do these results seem obvious to you?  Interestingly, René Lindstädt (Essex) and I have run a whole series of survey experiments on the US public’s views towards environmental, tax, and trade policy.  We find essentially no significant effect of many “globalization” primes and frames on environmental and trade policy, and a modest effect on tax policy.

Here is one working paper on the topic.

Jensen, Nathan M., Rene Lindstaedt and Justin Leinaweaver. Policy Diffusion or Insulation? Global Policy Choices and American Public Opinion.

We have a ton of new data to look at.  But, interestingly, some commentators (and reviewers) of this research on tax, environmental, and trade policy have noted that they’d be surprised if American’s responded to “global” primes and frames at all.  It certainly seems to matter for agriculture policy, and the impact it very large.

This is work in progress.  Any comments are welcome.  I also promise to make some pretty figures to present these results.  Ok, that is cheap talk.  Sorry mom.

Recent debates on the US farm bill have me going back to some data I collected in 2010.  Rather than discussing the details of the 1,000+ page farm bill, let’s ask a basic question.  Who supports farm subsidies?

Along with a team of other academics we fielded an internet survey through the Cooperative Congressional Election Survey on support for US agriculture policy.  We asked two questions about agriculture policy in the United States to a representative sample of 1,000 US residents.

The 30 second background on US agriculture is:

1. The US “Farm Bill” includes a lot of things that aren’t directly related to farming.  One of the largest components of this bill is the food stamp program.  The decision to include food stamps into the bill began in the 1970s and is well documented by John Ferejohn.  But the simple logic is that you can build a coalition of representatives in Congress from both urban and rural districts by linking these policies.  Ezra Klein has a pie chart the distribution across programs in the proposed bill.  [Although I have concerns about these projections since many are based on expected prices of crops, the number of people on food stamps, and ignores any supplemental farm legislation that adds more money into the pot down the road.]
2. While the US provides high levels of financial support to agriculture, less well known by most Americans (including academics) is that the US actually provides lower levels financial (and trade protection) support than most of the other developed countries.  A great book on the topic here.

In our survey we utilized the logic of a survey experiment, changing the “frames” or “primes” that respondents are exposed to.  The logic is that by exposing respondents to a quick story on US agriculture in one way or the other or changing a word here or there, we can examine how support for agriculture policy varies.  We specifically tested how the inclusion of food stamp programs affect support for agriculture policy, and how information on the relativelevel of US agriculture subsidies affects public support.

In this blog post I’m going to focus on the question of how the inclusion of food stamps affects public support for US agriculture policy.

In this question we asked a random sample of ½ of the 1,000 respondents question A (including the words “food stamps”):

Q1A:  The U.S. government provides a number of different types of support to farmers and the agriculture industry.  The last farm bill included financial payments to farmers, food stamps, and limits on foreign agriculture imports.

The other ½ received question B (excluding the words “food stamps).

Q1B:  The U.S. government provides a number of different types of support to farmers and the agriculture industry.  The last farm bill included financial payments to farmers and limits on foreign agriculture imports.

Then all respondents were asked:

In general, how supportive are you of these types of policies?

1. Very supportive
2. Supportive
3. Against
4. Strongly against
5. Don’t know

The difference between the two questions is only one word.  Respondents were randomized and the groups receiving the “food stamp” wording were roughly the same as respondents who received the control of no “food stamp” language.

Ignoring the differences between the food stamp and non-food stamps treatments, what do the responses look like in general?  Here is a quick table.

Support for US Agriculture Policy

Democrats are more supportive of ag policy than Republicans.  But for all groups, current US agriculture policy has majority support.

What happens when we include or exclude food stamps?  In aggregate, very little.  Support for US agriculture programs (summing Very Supportive and Supportive) is about 70% when food stamps are excluded, and about 71% when food stamps are included.

More interesting, and in some sense obvious, is how this affects the most partisan of voters.  When food stamps are included in the question, support by Democrats increases an additional 7%, from 77.67% supporting to 84.30% supporting.  Republicans are the mirror image.  Support drops a little under 7%, from 59.5% to 52.9%.  While independents are in the middle of the road in their support for agriculture programs (64%) they behave a lot more like democrats when we include food stamp programs.  Support increases 71%.

What does this exercise tell us?  Two things.

1. The inclusion of food stamp programs not only helps build a coalition in Congress, it also has some (partisan) impact on support for the farm bill.  But the tradeoff is that increased support by Democrats and independents are countered by a decrease in support by Republicans. The net impact is quite small.
2. No matter how we cut it, agriculture policy is quite popular.  Even amount Republicans, when we include the food stamp language, support remains above 50%.

In my next blog post I’ll write up the summer of a little experiment on framing this in competitive terms affects support.  Spoiler alert.  It matters.  A lot.

There is a leaked draft of the Trans-Pacific Partnership (TPP) circulating online.  The background details are a Google search away, but the key point is that there is a multi-country trade agreement being negotiated in secret.  The US is a relatively late entrant into the TPP negotiating process, but given the size of our domestic market US negotiators will have a major influence on any draft agreement.

Public Citizen, a US based NGO, announced they have obtained a draft of the document.

What did they find in the draft?  Straight from the Public Citizen’s analysis:

“Although the TPP has been branded a “trade” agreement, the leaked text of the pact’s Investment Chapter shows that the TPP would:

• Limit how U.S. federal and state officials could regulate foreign firms operating within U.S.  boundaries, with requirements to provide them greater rights than domestic firms;
• Extend the incentives for U.S. firms to offshore investment and jobs to lower-wage countries;
• Establish a two-track legal system that gives foreign firms new rights to skirt U.S. courts and laws, directly sue the U.S. government before foreign tribunals and demand compensation for financial, health, environmental, land use and other laws they claim undermine their TPP privileges; and
• Allow foreign firms to demand compensation for the costs of complying with U.S. financial or environmental regulations that apply equally to domestic and foreign firms.”

They go on to make the following claim:

“There are many provisions in the leaked TPP investment chapter text that replicate (identically or almost so) the damaging NAFTA investment chapter model.”

A few others have added fuel to the fire, including this contribution on the Huffington Post.

Before I launch into some criticisms, here is a quick 30 second background on the topic.

There’s been a bunch of published studies on Bilateral Investment Treaties (BITs) in the past few years.  These investment treaties specifiy some basic rights for investors and obligations of signing governments.  A really nice (quick) overview of BITs (or International Investment Agreements) can be found here.

Thousands of BITs have been signed, with some variation in content.  But the US is notorious for having a “model BIT” where the US negotiators have a boilerplate BIT and then negotiates from there.  Most of the US BITs look very similar.

What does this have to do with TPP?  Quite a few things.

1. Many trade agreements include “embedded BITs” or investment agreement clauses. Why?  The same reasons the WTO has tried to make more progress on Trade Related Investment Measures (TRIMS) and General Agreement on Trade in Services (GATS).   Trade isn’t only goods moving across borders.  Services are an important component of international trade, and many services, like banking, often require an investment in the host country.  So if you want to open financial markets, allow foreign companies to operate ports, invest in power provision, you need to cover investment.  Governments can also restrict trade by forcing firms to only use domestic suppliers (local content requirements).  We can obviously debate if this type of trade liberalization is a good thing, but including investment agreements as part of trade agreements isn’t some sinister secret.  Trade agreements generally include these provisions.

2. Did I mention the US likes to use boilerplate agreements?  The fact that the US wants the same types of investment provisions in TPP as they have in NAFTA isn’t a surprise.  We have a little paper on BITs where we look at the variation in the “exceptions” in US BITs (gated).  But the structure is pretty similar.  You don’t need a leak to figure this out.

3. In my opinion, the criticism of limiting the ability of governments to regulate foreign firms really misses the mark.  Trade and investment agreements often specify two ways that foreign producers/firms can be treated.  They can be granted “most-favored national status”.  This means that if the US cuts Canada a sweet deal, allowing Canadian airlines to investment in U.S. airlines (currently restricted), we would have to extend this benefit to other countries that are granted most favored nation status.  National treatment is generally a step above this.  You treat foreign firms that same as you treat domestic firms.  If you decide that auto producers should have certain fuel efficiency standards, you apply these standards to foreign and domestic firms

I personally think national treatment is quite important, not just for attracting investment.  It limits the political          power of domestic industries to try to carve out goodies for themselves.  These often can come under the veil of protecting the environment, labor rights, etc.  Daniel Kono has a really nice paper on this topic.

To be clear, I’m an environmentalist and also think labor rights are important.  But I think we should apply the same standards to domestic and foreign companies operating in the US.

4. The final point of Public Citizen, on the role of foreign tribunals, is pretty silly to me.  They are correct that investment arbitration allows foreign firms to bypass domestic courts.  The idea is that a neutral arbitrator can be used to enforce investment agreements.  This is especially important in countries where you don’t trust the courts.

But, domestic courts also act as arbitrators, limiting the sovereignty of states.  The 5^th amendment of the US constitution has similarities with the expropriation provisions being criticized.  Governments have to compensate if they seize property.  Again, we can debate the implications of restrictions on government ability to seize private property, but let’s not act that these investment agreements are so divorced from domestic law.  Jeff Staton and Will Moore have a great (gated) review article on the similarities between domestic and interational law.

What really bothers me most about the Public Citizen report is the language they use on the leaked report and the sinister tone.

This post isn’t meant to dump on Public Citizen.  My casual reading of many blog posts is that the tone if often nasty and that they often become unnecessarily personal.  I want avoid this unhelpful tone here.  So what are the interesting issues that emerge from this leaked document?

First, the point on the lack of transparency of trade negotiations is interesting.  Mike Moore’s “World Without Walls” has a thought provoking section on how politicians negotiated the WTO in private versus how they communicate their trade posiitons with their own public.  There’s tons of related social science research ranging from international negotiations to the use of roll call voting in legislatures (as opposed to unrecorded votes) that could be useful here.

Second, a good book that looks at a failed investment agreement (the Multilateral Agreement on Investment) is Edward Graham’s “Fighting the Wrong Enemy”.  Graham has his own policy views on the matter, but I think it is a good book that provides some evidence for the importance of NGOs in pushing for transparency, and more generally the expected impact of these investment agreements.  This is the sort of analysis of trade and investment agreements that can help illuminate and maybe even change some minds.

Third, the major investment arbitration body, ICSID, is very good at posting their concluded and pending cases.  Are these cases major constraints on sovereignty?  I think this is debate worth having, but let’s look at the data and talk about how these bodies constrain states, and if these constraints are any greater or different than the constraints of than domestic courts.  There are lots of research design pitfalls here, but the question is important.

Finally, I applaud NGOs that hold governments accountable by pulling the fire alarm.  Often these NGOs follow government activities more closely than average citizens and journalists, and have the expertise to analyze government activities.

I don’t have very strong opinions on the TPP.  I personally think this is going to be a very long and drawn out process that in the end will have a very limited impact on the US.  But it is an agreement worth analyzing.  Unfortunately Public Citizen’s analysis leaves a lot to be desired.

Sorry to any academic reading this for not providing citations to the many studies relevant for this post.  Sorry to the non-academics for the links to gated articles.  Sorry to my mom, the sole reader of this blog, for picking such a narrow topic.  To be honest, I don’t think my mom actually reads this blog.

A new Transparency International (TI) corruption report has me thinking about the difficulties of measuring corruption.  This post will provide links to a bunch of my published and unpublished papers.  Since my mom is probably the only reader of this blog, I don’t feel too bad about this shameless self-promotion.  Hi mom.

For years TI has provided one of the standard measure of corruption that is based on expert assessments of country level corruption.  This shouldn’t be news to any researcher.

The latest TI report examines a number of institutions in 25 European countries.  Most of these findings map into my intuitions on the level of corruption.  Scandinavian countries are the least corrupt and Southern Europe countries are some of the most corrupt.  The most disturbing part of the report are the backslides in anti-corruption efforts in Eastern and Central Europe.

The measuring and analysis of corruption is a lot more complicated than you might think.  The two most common approaches are to either ask experts to assess the level of corruption in a country or to ask individuals about their personal experiences with corruption.

Dan Treisman has an excellent Annual Review of Political Science piece reviewing the corruption literature and comparing the findings from studies using expert assessments versus individual experiences.  Treisman finds a pretty low correlation between the two, and only the perception based measures map into our theories of the causes of corruption.  For example, expert assessments of corruption find democracies as less corrupt, but reports from individual experiences with corruption don’t systematically vary.  (Ben Olken has some great work in this area as well.  See here).

The provocative conjecture from Treisman is that perception based measures may suffer from serious bias.  Experts believe that countries with democratic institutions, for example, are less corruption.  Thus when asked of how corrupt country X is, they use the level of democracy to evaluate the level of corruption.  The point is that democracy may not cause lower levels of corruption.  Democracy causes people to think a country is less corrupt.  Then we run regressions using this data and find that democracies are less corrupt.

I’ve often thought about this problem in my own research.  When asked about the level of corruption in government procurement, what information are experts drawing from to make these assessments?  Did they actually see the corrupt transactions?  Are they basing it on outcomes?  From media stories on corruption cases?  From research reports?

Due to these problems, many corruption researcher have begun to focus on asking individuals about their personal experiences with corruption.  This is especially prevalent in firm level surveys of the business environment across countries.  Without going into too many details, there are a few problems with this approach.

In a paper with Quan Li and Aminur Rahman, we observe some weird patterns in cross-national business corruption data.  Why does China and Kenya show up as having low levels of business corruption?  Why is Germany so high?  Our main finding is that there is systematic “non-response” bias.  Lots of firms don’t answer these questions, and this number increases in countries with more authoritarian institutions and less press freedom.  This non-response bias helps us explain these weird patterns.

This probably isn’t a surprise to many readers.  But the key point is that self-reporting of corruption can also be problematic.  Respondents can fail to answer questions or they could give false responses.

What to do?

One response is to try to help shield respondents from any potential repercussions from answering honestly.  One practical way to achieve this is to give respondents a coin and have them flip it without showing the enumerator.  Then the enumerator asks a series of questions, often around seven or so.

First question, have you ever paid a bribe to a police officer?  Flip the coin.  If it lands heads, say yes no matter what.  If it lands tails, answer honestly.  Second question.  Have you ever watched Dancing with the Stars?  Flip and answer.  Third question.  Have you ever cheated on your taxes?  Flip.  Have you ever cheered for the zombies to win in the Walking Dead?  Flip.

The logic behind this is: a) respondents have plausible deniability since they can always claim that they answered yes due flipping heads and b) laws of probability tells us that on average, each question should have at least 50% yes answers, and c) it if very unlikely that respondents would answer “no” seven times in a row (flipping 7 heads in a row).  Individual respondents are shielded for being held personally accountable for their answer, but researchers can use this date to examine systematic patterns of corruption and look at the distibution of answers to see if there problematic responses.

Previous research has used this technique to identify “reticent” respondents, or firms that don’t seem to be answering honestly.  In a survey of firms in Bangladesh, Aminur Rahman and I fielded corruption and tax questions to firms.  The coin flip technique dictates that at least 50% of responses should be “yes”.  For a bunch of the questions, such as cheating on taxes, we had responses well below 50%.  This means, even with the deniability assured by the coin flip technique, the pattern of responses indicates systematic underreporting of tax evasion.  Seehere for more details.

We also find that when enumerators are asked to evaluate the “truthfulness” of the respondents, the enumerators did a terrible job.  In the end, we find consistently problematic answers to direct questions on corruption and the coin flip technique.  The conjecture is that firms lie or skip direct questions on corruption, and answer “no” to the coin flip questions (even if they flip “heads”).  The coin flip technique helped us identity that there was systematic misreporting, but it didn’t directly allow us to measure corruption.

In another paper with Dimitar Gueorguiev and Edmund Maleksy we use a LIST experiment to evaluate the level firm-level corruption in Vietnam.  The logic of the list technique is that half of the sample (firms) in our case, gets a list of 4 questions and the other half gets 3 questions.  Our question was:

LIST QUESTION:  Please take a look at the following list of common activities that firms engage in to expedite the steps needed to receive their investment license/registration certificate. How many of the activities did you engage in when fulfilling any of the business registration activities listed previously?

1. Followed procedures for business license on website.

2. Hired a local consulting/law firm to obtain the license the firm for you.

3. Paid informal charge to expedite procedures

4. Looked for a domestic partner who was already registered

Thus half the same gets all 4 questions, and the other half gets only gets questions 1,2 and 4 (the non-corruption questions).  Respondents only give the number of activities they’ve engaged in, not the specific items.   But, by including the corruption question in the expeirmental group, we can compare the mean of the experimental group to that of the control group.  If the mean reponse of the groups are the same, this technique hasn’t detected any corruption.  If the means are different, we calculate the percentage of firms reporting that they engaged in corruption.

By comparing the two groups, we find that almost 23% of firms paid bribes, and this relationship varies across sectors, time, and foreign versus domestic ownership.  Our key points relate to the relationship between foreign investment and corruption and Vietnam’s entry in the World Trade Organization.

Unfortunately, this technique only works if you can directly survey the individuals or firms engaging in corruption.  If you believe there is corruption within political parties, it is difficult to design a study to directly measure this corruption.  Then we are back in the world of having to lean on the evaluations of experts.

I started this blog post claiming this is shameless self-promotion.  But if you actually made it this far, you can see that there are more open questions than answers.  I guess this is both the benefit and frustration in being really invested in a research question.  These is very little low hanging fruit in this area, but there are lots and lots of interesting to be answered.

If you have a paper on this topic, shoot me off an email.  Bye mom.

There has been a flurry of activity on the blogs and a few emails from our professional association (The American Political Science Association) on a potential funding cut or outright elimination of Political Science funding from the National Science Foundation.

A bunch of academics (much smarter than me) have posted on this.  See some links on the Monkey Cage here,here, and here.

One of our top journals also ran a “virtual” issue, putting a bunch of NSF funded studies online.

The Midwest Political Science Association has suggestions on how to support the NSF.

Out of professional solidarity and a sincere belief that the NSF political science program is a good investment, I feel like I should withhold any criticism of the program.  Then I remembered I have no blog readers.

Two points:

Points 1:  Why the fuss?

The NSF political science program is very small. Why such heated debate over a relatively small program?  A few conversations with colleagues in the hallways came up with a few possibilities.

Conjecture 1: Anti-Intellectualism.  Or we could say a more general hostility towards government funding of research.  But this wouldn’t explain why political science has been target.

Conjecture 2:  Lack of understanding of political science research.  Listening to partisan pundits on TV makes me hate politics.  Interestingly, many of the critics of NSF-political science have undergrad or (and in the case of Rep. Flake) MA degrees in political science.  At least one friend mentioned that many universities teach undergrad political science that is divorced from the process of conducting research.  The big difference between what we practice and what we preach might be problematic.

Conjecture 3: Stay out of my business.  Political scientists study political institutions and politicians.  Politicians don’t like being the subject of study.  I’m sure I could make a much more nuanced point on this, but you get the gist.

Conjecture 4: Marketing.  Failure of our profession to “market” our value.  I’m always struck how good economics profession is in circulating working papers and getting research highlighted in the press.  I see a lot less of this in political science.  I think the bloggers at the Monkey Cage and the recent Scholars Strategy Network are actually doing a real service to the profession (and society).

Point 2:  How can we make the NSF and political science better?

There is a really interesting NBER working paper (gated) the examines NIH funding.  This made me think about potential reforms of NSF-Political science…if it survies.

A few quick points.  Defending the NSF-PS program by showing that the funding has led to some great research reminds me of a conversation I had with an administrator about graduate school funding.  Would a sixth year of graduate school make a student’s dissertation better?  Of course, but is that really our standard?  More inputs will (hopefully) lead to more outputs.

Some suggestions that will help both evaluation of the NSF and have some positive impact on political science research.

1. Include information on funded and unfunded projects.  Having information on not only what is funded, but what is passed up for funding is necessary to evaluate the NSF.  Pretty obvious stuff.
2. The NSF could do a better job in making data available.  While the NSF requires grant applicants have a data sharing plan, the NSF could either house replication data or require grantees to provide active links to data.  A nice example of this is the NSF funded, Time Sharing Experiments in the Social Sciences (TESS).  http://www.tessexperiments.org/
3. TESS also provides a nice template for how to require researchers to specify the study design and hypotheses.  This not only gives clear information on the projects that are funded, it provides accountability for researchers.
4. Require the publications from NSF studies to be made publically available.  See here.

These are all very modest ideas that have been articulated in more details elsewhere.  But it is possible that some of these arguments are new to my sole reader.

This NY Times article on changes to US agriculture policy is a good example of reasonable sounding policies that are actually terrible ideas.

The article outlines proposals to reform US farm policy, moving budget allocations from paying farmers either to not farm (conservation reasons) or to cut checks to farmers based on their land (or previous production).  A shift towards more “crop insurance” policies would basically give farmers nothing when agriculture prices are high, and automatic payments would kick in for their products when farm prices are low.  Farmers are basically insured against future losses and they get paid for what they actually farm.  Seems fair.

Unfortunately, this goes against consensus that “coupled” farm payments, payments based on production, are terrible policies.  How does this work?  If you pay farmers a high price per bushel of corn, farmers grow more corn often at the expense of other crops, corn prices drop, producers and consumers substitute corn for other products.  Then Bloomberg has to ban sodas.  High subsidies based on production will lead to overproduction.  This isn’t hard to understand.

Crop insurance has similar distortions.  When global food prices are low, farmers have the incentive to keep producing if insurance prices are high enough.  There is a lot of complexity to this programs, but the key point is the difference between coupled and decoupled programs.  For a nice cross-national overview see this excellent book.

If politics or social objectives force us to subsidize agriculture, what is a better alternative?  Decoupled programs, like paying farmers based on historical production or acreage isn’t a bad option.  Farmers get cut a check, and then they can make their production decisions.  Conservation programs, if correctly targeted, can help keep farm prices high while having environmental benefits.  These still cost taxpayers money and have distortions, but to a lesser degree than coupled programs.

I’m no fan of US farm subsidy programs.  But if we’re going to spend scarce resources on subsidies, let’s do it in a way that causes the smallest distortions and has the most social benefits.  The proposed crop insurance changes fail on both counts.  Unfortunately, coupled programs make better talking points for politicians.

BREAKING NEWS:  The Environmental Working Group likes the ammendments on the crop insurance program.  Worth listening to their argument.