Portrafke (2009) Flashcards
Empirical memorisation.
What is the research objective or Portrafke (2009)?
The study is concerned whether empirical evidence supports the Efficiency or Compensation hypothesis of globalisation’s impact on partisan cycles.
Briefly describe the Efficiency effect outlined by Portrafke (2009).
Tax competition between national governments puts downwards pressure on tax rates. Governments also reduce public spending, especially social welfare spending, due to a tighter budget constraint.
What do we expect if the Efficiency hypothesis holds?
We expect a higher degree of globalisation to be associated with smaller governments.
Briefly describe the Compensation effect outlined by Portrafke (2009).
Higher levels of external risk brought about by globalisation generates higher demand for social insurance. This demand is satisfied by politicians looking to promote their opportunistic or partisan ideals.
What do we expect if the Compensation hypothesis holds?
We expect higher globalisation to go in hand with larger governments.
What are the findings of Portrafke (2009)?
When globalisation proceeds at an average pace, partisan politics had no effect on social expenditure. However, when the rate of globalisation rises rapidly Left-wing governments increased social expenditures. This favours the Compensation hypothesis.
There are two schools of thought that relate to the globalisation-welfare issue: describe the Partisan approach.
The Partisan approach predicts the Leftist governments respond to globalisation by implementing higher social expenditure policies than Right-wing governments.
There are two schools of thought that relate to the globalisation-welfare issue: describe the Non-Partisan approach.
The Non-Partisan approach is what is split into the Efficiency / Compensation hypotheses. It predicts either the welfare state will collapse (Efficiency) or it will extend (Compensation).
Which hypothesis does empirics support? Efficiency or Compensation?
Empirics generally supports the compensation hypothesis.
Garret (1998) argues “the relationship between the political power of the Left and economic policies that reduce market-generated inequalities has not been weakened by globalisation.”
Portrafke (2009) posits that globalisation increases “market dislocations”: briefly describe this belief.
Market dislocations occur when financial markets, operating under stressful conditions, experience large asset price distortions.
These dislocations cause greater demand for interventionist policies while Leftist governments are happy to supply.
Briefly describe the econometric model in Meinhard and Potrafke (2012).
The independent variable is the natural log of the size of government. The key dependent variable is the log of globalisation.
Globalisation is measured by the KOF globalisation index.
What are the findings of Meinhard and Potrafke (2012)?
For the economic subsection of the KOF index, there is a positive yet insignificant coefficient of Globalisation. Therefore there is little support for the Compensation hypothesis from this paper.
