How Do Political Institutions Work?
Intertemporal Interactions, Veto Players, and Policy Adaptability
Carlos Scartascini
Ernesto Stein
Mariano Tommasi
“ Institutions may be seen as architecture and as rules that determine
opportunities and incentives for behavior, inclusion and exclusion of potential
players, and structuring the relative ease or difficulty of inducing change, and the
mechanisms through which change may be facilitated or denied.”
Rhodes, Binder and Rockman (2006, p. xiii).
Introduction to the Oxford Handbook of Political Institutions
Research on POLITICAL INSTITUTIONS
Origin of institutions
Emphasis on Intertemporal Transactions




Williamson: firm
North-Weingast: Parliament
Fearon: electoral democracy
Weingast-Marshall: institutions within Congress
Effects of political institutions (on policies)
Less emphasis on Intertemporal Transactions

Mostly (static) spatial models
-

Some exceptions (institutions within US Congress)
-

Persson and Tabellini: economic dynamics
Repeated game versions of Baron-Ferejohn (or of WSJ)
Little of that for 1st order institutions – comparative politics
-
some informal discussions
political party systems (Mainwaring)
Executive / Legislative relations (Shugart, Carey)
Research on POLITICAL INSTITUTIONS
Origin of institutions
Emphasis on Intertemporal Transactions




Williamson: firm
North-Weingast: Parliament
Fearon: electoral democracy
Weingast-Marshall: institutions within Congress
Effects of political institutions (on policies)
Less emphasis on Intertemporal Transactions

Mostly (static) spatial models
-

Some exceptions (institutions within US Congress)
-

Persson and Tabellini: economic dynamics
Repeated game versions of Baron-Ferejohn (or of WSJ)
Little of that for 1st order institutions – comparative politics
-
some informal discussions
political party systems (Mainwaring)
Executive / Legislative relations (Shugart, Carey)
• GENERAL (AGENDA)
– The effects of institutions on policy should (also) be studied from
a perspective of intertemporal transactions
 Repeated Games
• SPECIFIC (THIS PAPER)
– Show in one specific and important context how viewing things
this way can lead to predictions different from “static”
approaches
In particular: VETO PLAYERS Approach
We confront one of their main predictions, that having more veto
players necessarily makes policy change less likely.
1. VP Approach
2. IT Approach (& 1 model / example)
3. Empirical Evidence
VETO PLAYERS THEORY
• Tsebelis 1995 1999 2000 2002
– “Tour de force of modern political science theory”
– “Veto Players should be required reading for all scholars
of comparative political institutions”
– “Veto point and veto player approaches have come to
occupy a central place in comparative politics, especially
in the fields of comparative public policy”
– Oxford Handbook of Political Institutions (3 of 2000)
– Logic applied to: welfare states, inequality, fiscal
adjustment, tax competition, monetary policy and
institutions, international trade arrangements, business
environment, European Union policymaking, etc.
VETO PLAYERS THEORY
Motivation
• Most previous literature dyadic criteria
–
–
–
–
presidential / parliamentary
majoritarian / proportional
two party / multiparty
etc
• Comparisons across countries difficult
– multiple institutional features
• Interactions?
– Cannot just add up the different effects
• Need systemic approach
– Tsebelis: “configuration of veto players”
• actors whose agreement is necessary to change policy
VETO PLAYER Approach (Tsebelis 2002)
Dependent variable:
• POLICY STABILITY --
Seen as trade-off:
–  : Gives COMMITMENT
–  : Does not give DECISIVENESS
(capacity to solve problems as they arise)
Independent variable:
• (intermediate): VETO PLAYER configuration
– Veto Player: Actors whose agreement is necessary to change policy
• (final) Political Institutions
– Tsebelis 2002, Part II: “rules according to which all political institutions
(regime types, parliaments, party systems, parties, and so on) are
translated into a series of veto players.”
POLITICAL
INSTITUTIONS
VETO PLAYER
CONFIGURATION
POLICY STABILITY
Size of winset
Prediction: More veto players  Policy more stable
NOTE
Most of Tsebelis’ initial work was mainly on Parliamentary systems
Presidents, Parliaments, and Policy
Haggard and McCubbins (eds.) & Ch 1 / Cox and McCubbins Ch 2 /
Shugart and Haggard Ch 3 / countryXpolicy case studies
• Instruments a “veto player logic” to presidential democracies
• Refines specification of dependent variable
Political Institutions
Constitutional Division of
Power
Presidentialism
Bicameralism
Federalism
Judicial Review
Electoral System
Effects on Party System
(fragmentation)
Veto Player Configuration
- Separation of Power
Characteristics
of Policymaking/
of Policies
- Separation of Purpose
• Decisiveness:
Effective Number of Veto Players
Ability to change policy
• Resoluteness:
Ability to commit to a given policy
Presidents, Parliaments, and Policy
Haggard and McCubbins (eds.) & Ch 1 / Cox and McCubbins Ch 2 /
Shugart and Haggard Ch 3 / countryXpolicy case studies
• Instruments a “veto player logic” to presidential democracies
• Refines specification of dependent variable
Political Institutions
Constitutional Division of
Power
Presidentialism
Bicameralism
Federalism
Judicial Review
Electoral System
Effects on Party System
(fragmentation)
Veto Player Configuration
- Separation of Power
Characteristics
of Policymaking/
of Policies
- Separation of Purpose
• Decisiveness:
Effective Number of Veto Players
Ability to change policy
• Resoluteness:
Ability to commit to a given policy
Haggard and McCubbins, p. 6:
A more decisive polity must necessarily be less resolute
Summary “Veto Player Theories”
PROPOSITION 1:
A more decisive polity must necessarily be less resolute
(Haggard and Mc Cubbins, p. 6)
PROPOSITION 2:
As the effective number of vetoes increases, the polity becomes more
resolute and less decisive
(Haggard and Mc Cubbins, p. 27)
Many veto players make significant policy changes difficult or impossible
(Tsebelis 2002, p. XV).
Summary “Veto Player Theories”
PROPOSITION 1:
A more decisive polity must necessarily be less resolute
(Haggard and Mc Cubbins, p. 6)
PROPOSITION 2:
As the effective number of vetoes increases, the polity becomes more
resolute and less decisive
(Haggard and Mc Cubbins, p. 27)
Many veto players make significant policy changes difficult or impossible
(Tsebelis 2002, p. XV).
In this paper we debate these propositions.
AN INTERTEMPORAL
FRAMEWORK
A. VP Framework of Tsebelis (1995 and 2002)
Independent variables
Theoretical construct
POLITICAL
INSTITUTIONS
Dependent variable/s
VETO PLAYER
CONFIGURATION
Number
Ideological Distance
Internal Cohesion
POLICY STABILITY
B. Framework of Cox and McCubbins in Haggard and McCubbins (2001)
Independent variables
Theoretical construct
Dependent variable/s
POLITICAL
INSTITUTIONS
“VETO PLAYER”
CONFIGURATION
Separation of Power
Separation of Purpose
C. Intertemporal cooperation Framework
Independent variables
Theoretical construct
POLITICAL
INSTITUTIONS
Intertemporal
cooperation
structure
DECISIVENESS
RESOLUTENESS
Dependent variable/s
ADAPTABILITY
STABILITY
Decisiveness
Resoluteness
Decisiveness
Resoluteness
Decisiveness
More cooperative policymaking environment
Less cooperative policymaking environment
Resoluteness
Framework: Intertemporal Political Cooperation
• Framework emphasizes ability of political actors to cooperate
• Policies with some desirable characteristics likely to emerge if
players can
– cooperate
– uphold agreements over time
• In systems that encourage cooperation
– consensus on policy orientation more likely to emerge
• related to notions of consensual democracy
– related to notions of deliberative democracy
– successive administrations more likely to build upon
achievements of predecessors
– easier to adjust to changing circumstances
• Whether political systems encourage/achieve cooperation
– Depends on various things
– Some important ones relate to political institutions
• In previous work we have
– Related some aspects of political institutions to better policies
• Political parties that are institutionalized and programmatic
• Legislatures with sound policymaking capabilities
• Independent judiciaries
• Strong bureaucracies
– Studied the effect of some specific institutions usually
considered
• This paper focus on (“reduced form”) number of veto players
– Sometimes it might facilitate cooperation and hence, policy
adjustment
Modelling Intertemporal Political Cooperation
•
•
•
Nothing new
Similar modelling as Dixit 2003, Dixit et al 2000, Alesina 1988, de Figueiredo 2002
PM as intertemporal exchanges (TCETCP) as in North 1990, Dixit 1996, Levy and
Spiller 1996, Huber and Shipan 2002, Epstein and O’Halloran 1999.
FAMILY OF MODELS:
1.
2.
3.
4.
Politics and policymaking take place over time (repeated game)
Shifting power over time (t)
Conflict and commonality of interests (non-trivial payoff matrix)
Changing underlying conditions (t)
Dependent variable: policy characteristics Y, including:
–
–
Adaptability: Y*()
Stability: Y does not change for reasons other than  (invariant to )
Defining the dependent variables
Tsebelis: Stability.
This paper:
Cox McCubbins: Decisiveness – Resoluteness.
Adaptability:
• the ability to adapt to exogenous shocks (Tsebelis 1999: 591)
• the flexibility to resolve problems faster (Tsebelis 2002: 7)
• the capacity to solve problems when they arise (Tsebelis 2002: 6-7)
• the ability to innovate when policies fail (Weaver and Rockman 1993)
• the adaptation of social programs to contemporary socio-economic risks
(Natali and Rhodes, 2006)
• the ability of policy to adapt to new conditions (International Institute for
Sustainable Development, 2007)
Stability:
• the ability to ensure policy stability so that policies have time to work
(Weaver and Rockman 1993: 6)
• the ability to make and maintain international commitments in the realm of
trade and national defense (Weaver and Rockman 1993: 6)
• credible commitment not to alter the rules of the game each time there is a
government change
• the ability to uphold promises (Cox and McCubbins 2001: 31)
• the ability to carry out a policy compromise (Cox and McCubbins 2001: 31)
• the consistency with which a policy is implemented (Rodrik 1995: x)
The model
• We write one specific model within the general “class” above
• Example could be interpreted as ( )
– budget
• negative shock that requires risk sharing
• positive investment opportunity / externalities
– (non-budget) independent random issues arising over time,
possibility of changing from a given status quo
Repeated game
•
•
•
•
•
•
δ
N players, v of which seat at decision table
t : assigns who are at the v players at the table at t
Unanimity (v veto players)
Allocate budget
t
Non-cooperative equilibrium
• Ignore welfare of (N-v) outside the table at that period
– Exactly how split within table depends on bargaining
protocol
Y()
First best
• Max everybody’s (N) long term welfare
– responsive to t
Y*()
Cooperative equil that implements first best
• Trigger strategy: Do as first-best unless an allocation
different from Y*() was implemented. If so revert to noncoop forever
Y*()
Non-cooperative equilibrium
• Ignore welfare of (N-v) outside the table at that period
– Exactly how split within table depends on bargaining
protocol
Y()
neither adaptable nor stable
First best
• Max everybody’s (N) long term welfare
– responsive to t
Y*()
Cooperative equil that implements first best
• Trigger strategy: Do as first-best unless an allocation
different from Y*() was implemented. If so revert to noncoop forever
Y*()
adaptable and stable
• Verifying under what conditions deviating from this
equilibrium is not profitable:
    N  1    1 



 
 1     N  1    v 
• Cooperation is more likely for larger v
• In this example, cooperation, and hence stability and
adaptability, increase with the number of veto players.
Other channels
• General point: the optic of intertemporal cooperation generates
additional channels for the effects of political institutions on
outcomes of interest
• This paper focuses on v
• We built one specific example in which greater v increases
cooperation (and hence stability and adaptability)
• There are other channels through which that might happen:
– What matters is not only
Institutions how many people at the decision table today,
but also
Institutions  intertemporal allocation of decision power
(what are my chances of being there tomorrow)
And that could affect my willigness to cooperate today, allowing a
change that might harm me in the short run
Veto Player Theories
PROPOSITION 1:
A more decisive polity must necessarily be less resolute
PROPOSITION 2:
As the effective number of vetoes increases, the polity becomes more
resolute and less decisive
Intertemporal Approach
PROPOSITION 1’
A more decisive polity not necessarily must be less resolute. There are
some forces (of different equilibria in repeated-interaction contexts)
leading to a positive association between decisiveness and
resoluteness (adaptability and stability).
PROPOSITION 2’ Many veto players do not necessarily make
significant policy changes difficult or impossible. There are some
channels through which more veto players increase policy
adaptability.
6. Empirical Analysis
6.1. Dependent Variables
• Indicators of Stability and Adaptability
• The best we could get our hands on from wide
international data sets
• Mostly subjetive data: opinions of businessmen, experts
• Various different sources
• We are exploring the correlation of these indexes with
more specific (sometimes objective) measures of policy
characteristics (available for smaller samples)
• Cross-section
Box 1 :
Correlation Adaptability Index and degree to which fiscal and
social policy respond to economic and social situation.
Social Spending
Total Spending
Adaptability
Adaptability-hi
Social
Total
Spending Spending
1.00
0.6961*
1.00
0.5289*
0.4894*
0.5928*
0.5324*
(source: Braun and di Gresia 2002)
Dependent Variables
Adaptability:
Four variables:
•
Bertelsmann Transformation Index (BTI) Adaptability Variable 2006 ranking. Questions comprising
BTI’s adaptability index include the ability of the political leadership to act flexibly, political leaders’
capability for learning, and whether political leaders can replace failing measures with innovative
policy.
•
Columbia State Capacity Survey, (1990, 1999, 2000, 2002) Rate the state’s ability to respond
effectively to domestic economic problems.
•
Profils Institutionnels-database 2006: Decision-making capacity of the political authorities in
economic matters (responsibility, rapidity, etc)
•
Columbia University State Capacity Survey (1990, 1999, 2000, 2002) Rate the state’s ability to
formulate and implement national policy initiatives
Stability:
Four variables:
•
Standard deviation of the detrended Fraser Index of Economic Freedom (quadratic trend) (19802004)
•
Global Competitiveness Report (GCR, 2002): Legal or political changes over the past five years
have (1=severely undermined your firm's planning capacity, 7=had no effect)
•
Global Competitiveness Report (GCR, 1998, 1999, 2000, 2002): New governments honor the
contractual commitments and obligations of previous regimes (1=not true, 7=true).
•
Profils Institutionnels-database 2006: “Consistency and continuity of government action in
economic matters”
6.2. Testing Veto Players Hypotheses
PROPOSITION 1: A more decisive polity must necessarily be less resolute
Contrary to the hypothesis, all 17 correlations are positive, many of them significant.
(controlling for level of development, region and legal origin)
Table 2. Correlation between the components of stability and adaptability –no controls
Adaptability Components
Decision
State
Adaptability
State
Stability
Making
Effectiveness
(BTI)
Responsiveness
Components
Capacity
0.18
0.41***
0.31***
0.42***
83
93
73
93
Frazer Volatility
0.08
0.32***
0.23*
0.29***
70
83
65
83
0.10
0.72***
0.41***
0.61***
49
61
54
61
Government
Commitment
0.22
0.37***
0.15
0.29**
39
53
46
53
0.35***
0.62***
0.62***
0.59***
49
61
53
61
Policy Changes
0.40**
0.22
0.47***
0.26*
39
52
45
52
0.35***
0.47***
0.74***
0.51***
65
78
85
78
Policy
Consistency
0.41***
0.13
0.50***
0.28**
49
63
69
63
Stability
Adaptability
0.54***
122
0.16
100
Note: significant at 1% level (***), 5% (**), and 10% (*)
Second line in each row is number of observations
Second row for each variable is the correlation controlling for Ln(GDPpc), Region, and Legal Origin
-2
-1
0
1
Stability and Adaptability Scatterplot
-2
-1
0
1
Adaptability/GDP, Reg, and Legal
2
PROPOSITION 2:
“… more veto players reduce policy adaptability”
We utilized four different measures/proxies for the number
of veto players that were available in broad cross
national empirical studies:
Table 3. The veto variables
Variable
Executive Constraints (Polity IV)
It refers to the extent of institutionalized
constraints on the decision-making powers of
chief executives, whether individuals or
collectivities.
Executive Constraints (Henisz):
It refers to the limit on the executive's actions.
(1) Unlimited Authority: There are no regular
limitations on the executive's actions, to (3)
Slight to Moderate Limitations an Executive
Authority, to (7) Executive Parity or
Subordination: Accountability groups have
effective authority equal to or greater than the
executive inmost areas of activity. Those
polities described with a (3) or above also
contain an independent judiciary
POLCONV:
It is constructed by identifying the number of
independent branches of government with veto
power over policy change and is then modified
to take into account the extent of alignment
across branches of government using data on
the party composition of the executive and
legislative branches.
Checks:
This variable adds the number of checks a
country has. Starting with one in countries
where legislatures are not competitively
elected, it increments its value if there is a chief
executive, if the chief executive is
competitively elected, if the opposition controls
the legislature, and so on.
Coverage
Observations
Source
average of data
from 19902003
147
University of
Maryland Polity IV
Project
average of data
from 19902004
147
Political Constraints
Index Dataset
average of data
from 19902004
151
Political Constraints
Index Dataset
average of data
from 19902004
148
Database of Political
Institutions,
Table 4. Regressions on adaptability (weighted least squares).
(1)
Executive
Constraints
(Polity IV)
Executive
Constraints
(Henisz)
PolconV
(2)
(3)
0.14***
(0.04)
(5)
(6)
0.14***
(0.04)
0.43
107
(8)
0.17***
(0.05)
1.07***
(0.29)
Yes
(7)
0.16***
(0.05)
Checks
Ln(GDPpc)
Region
Legal Origin
AdjR2
Obs
(4)
Yes
0.43
108
Yes
0.94***
(0.32)
0.12**
(0.05)
Yes
0.44
109
Note: significant at 1% level (***), 5% (**), and 10% (*)
0.40
109
Yes
Yes
Yes
0.63
106
Yes
Yes
Yes
0.61
107
Yes
Yes
Yes
0.61
108
0.08
(0.06)
Yes
Yes
Yes
0.45
106
6.3. Some evidence incorporating intertemporal factors
Table 5. Intertemporal cooperation, and stability and adaptability (weighted least squares).
Stability
Adaptability
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Time Horizon
0.09**
0.22***
(0.04)
(0.07)
Cohesion
0.01
0.20***
(0.04)
(0.07)
Party Institut.
0.20***
0.42***
(0.07)
(0.12)
Judicial
0.31***
Independence
(0.06)
Ln(GDPpc)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Region
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Legal Origin
Yes
Yes
Yes
Yes
Yes
Yes
Yes
AdjR2
.53
.52
0.55
0.64
.50
.61
0.63
Obs
103
75
104
100
107
73
108
Note: significant at 1% level (***), 5% (**), and 10% (*)
(8)
0.54***
(0.09)
Yes
Yes
Yes
0.62
104
6.4. Attempting to recover the veto-players trade off
Decisiveness
More cooperative policymaking environment
Less cooperative policymaking environment
Resoluteness
Hypothesis 1
Table 6. Correlation between adaptability and stability
Controlling for
Ln(GDPpc) + Regional +
Legal Origin
Whole sample
0.16
Sample divided by
Time horizon1
Time horizon2
High
Low
High
Low
0.62***
-0.22
0.45***
N
100
50
50
78
Note: significant at 1% level (***), 5% (**), and 10% (*)
1
Low and high corresponds to countries being above or below the median
2
Low and high corresponds to countries being above or below the 75 th percentile
-0.61***
21
Hypothesis 2
Table 7. Regressions on adaptability (weighted least squares).
(1)
(2)
Executive Constraints (Polity IV)
0.08
(0.08)
Executive Constraints (Henisz)
.09
(.08)
PolconV
(3)
.18
(.42)
Checks
Time horizon
.09
.09
(0.09)
(.09)
Cohesion
.18***
.18***
(.06)
(.06)
Party Institutionalization
.25*
.26*
(.14)
(.14)
Judicial Independence
.32**
.31**
(.13)
(.13)
Ln(GDPpc)
Yes
Yes
Region
Yes
Yes
Legal Origin
Yes
Yes
AdjR2
0.72
0.72
Obs
69
69
Note: significant at 1% level (***), 5% (**), and 10% (*)
(4)
.09
(.09)
.18***
(.06)
.24*
(.14)
.36***
(.13)
Yes
Yes
Yes
0.71
69
.01
(.06)
.08
(.09)
.18**
(.07)
.23
(.14)
.40***
(.11)
Yes
Yes
Yes
0.71
68
Parting thoughts
• Intertemporal cooperation is important
• Keep that in mind if you have to design
institutions