motivation

Motivation• Economists, IFIs emphasize policy recipes to achieve development

goals.• In Latin America this has led to adoption of “Washington

Consensus” reforms.• The outcome somewhat disappointing.• IPES: Potential of policy recipes depends on the quality of the

policymaking process through which policies are discussed, approved, and implemented.

• Improvement (and better understanding of) policymaking processes key in order to improve the quality of public policies and achieve development objectives.

Motivation• Even within LAC, substantial differences in the quality of public policies.• In some countries policies are stable and predictable, in others policies

change with every change in government.• Some countries able to adjust policies in response to shocks, or innovate

when policies fail, others get stuck in bad policies.• Some are able to implement and enforce policies effectively, others

unable to do so.• Some adopt policies with broad benefits, others reflect the pressures of

special interest groups. • What determines the capacity of countries to design, approve and

implement effective public policies?

Objectives• Improve understanding of process by which policies get

enacted, approved and implemented (the PMP).

• Improve understanding of relationship between PMP and quality of public policies.

• Improve policy recipes, by adapting them to (political) institutional capabilities.

• To contribute to the debate about reform of political institutions, shedding some light on their effects on policy.

Beyond a technocratic approach to policymaking

• In technocratic approach to policymaking, public policies are objects of choice.

• Policymakers seen as social planners, just need to adopt policies that produce best social outcomes.

• Actual policymaking involves a multiplicity of political actors, interacting in a variety of arenas.

• Some are professional politicians or policymakers, others members of civil society.

• Each brings its own preferences and capabilities to the PMP.• Public policies not the result of purely technical considerations; political

considerations play an important role.

Beyond a technocratic approach to policymaking

• In IPES, public policies seen as the outcome of inter-temporal transactions among political (and technical) actors.

• IPES places less emphasis on content of policies, more emphasis on process of policymaking, and certain resulting policy features.

• These processes differ significantly from country to country, 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.– More relevant “frequency” for policy implications.

Political institutions and policy outcomes• Literature on effects of political institutions on policy outcomes tends to

focus on single institutional dimension, and explores its impact on some policy outcome.

• PMP do not depend on single-factor explanations but rather on a multiplicity of factors, and their interaction.

• We adopt systemic approach, more appropriate to:– understand why policy reforms that work under certain institutional environments

may not work under others– think about the reform of political institutions.

• Approach requires deep knowledge of institutional details of the countries under study.

Country focus• First phase of the research agenda focused on detailed country

studies, carried out by teams of economists and political scientists in the region.

• Phase I: Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela.

• We have added Costa Rica, Guatemala and Jamaica.

• Country studies are key input for the report.

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.

– Public regardedness.

– Efficiency.

Measuring key features of policies• We use two sources of data.

• International comparative indicators from the 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 the quality of policymaking under current administrations, but during this longer period.

• Indices not perfect, seen as first pass at measuring these important features, good starting point to study link between political institutions and policy outcomes.

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.

1 2 3 4

Venezuela

Argentina

Ecuador

Guatemala

Nicaragua

Bolivia

Paraguay

Dominican Rep.

Peru

Panama

Honduras

El Salvador

Mexico

Colombia

Brazil

Costa Rica

Uruguay

Chile

Stability Index (1-4 scale)

Source: Authors’ compilations.

Policy Stability index

1 2 3 4

Venezuela

Argentina

Ecuador

Guatemala

Nicaragua

Bolivia

Paraguay

Dominican Rep.

Peru

Panama

Honduras

El Salvador

Mexico

Colombia

Brazil

Costa Rica

Uruguay

Chile

Stability Index (1-4 scale)

Source: Authors’ compilations.

Policy Stability index

HighHigh

LowLow

MediumMedium

Key features of public policy since 1980s

LLMLMLLVenezuela

HMMMHHHUruguay

MMMMMMMPeru

LLLLLLMParaguay

LLLLMLMPanama

LMLLMMMNicaragua

HHMMHMHMexico

MMLMMMHHonduras

LMLMLMMGuatemala

HHMMHHHEl Salvador

LLLLLMLEcuador

MMLMMMMDominican Rep

HHHMHMHCosta Rica

HMMMHHHColombia

VHHHHHHHChile

HMMHHHHBrazil

MMMMMHMBolivia

LLMLLMLArgentina

Policy IndexEfficPublic RegCoord / Coherence

Impl/EnfAdaptStabCountry

Why focus on key features of policies?• More naturally linked to the institutional environment than the

content of policies themselves. – Content of policies may shift back and forth within a certain institutional

environment in response to political shock.

– Features such as stability or adaptability will remain the same.

• More closely related to political institutions than outcome variables such as economic growth.

• Reassuringly, features of public policy and the overall policy index correlate well with growth and other welfare indicators.

Policy Index and welfare measuresSimple and partial correlations

Latin America Developing Countries

GDP per capita growth 1980-02

0.700 ***

0.509 ***

0.420 ***

0.445 ***

HDI (change from 1980 to 2002)

0.376

0.614 ***

0.400 ***

0.393 ***

Poverty reduction

(from 80-90 to 95-00)

0.439 *

0.300

0.461 ***

0.450 ***Partial correlations (in yellow) control for GDP per capita in 1980.Developing country sample uses restricted version of policy index (excluding statecapability survey questions).

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?

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.

• Basis for part II of the IPES (chapters 3 through 5).• “Democracies in Development” project also key input for this part of the IPES.

PoliticalInstitutions

PMP Policy

Outcomes

PMP Policy outcomes

• Key insight: features of public policies depend crucially on the ability of political actors to achieve cooperative outcomes, striking and enforcing inter-temporal deals.

• In cooperative political environments, public policies will tend to be of higher quality, less sensitive to political shocks, more adaptable to changing economic conditions.

• Additional insight: quality of public policies also depends on the policymaking capabilities of key actors in PMP.

What determines cooperation?

• Number of actors with impact on the policymaking game.

• Discount rate of actors (related to expected tenure).

• Frequency of their interactions.

• Extent of convergence or divergence of preferences.

• Well-functioning institutionalized arenas for political exchange (institutionalized parties, congress).

• Credible enforcement technologies (an independent judiciary, strong bureaucracy to which public policies can be delegated).

Political Institutions PMP• In turn, key aspects of the PMP are determined by the nature of

the political institutions. – Constitutional rules determine role played by each actor involved

in the PMP, rules of engagement among them.

– Electoral rules also help shape number of actors and their incentives.

– Political institutions also determine whether the primary arena where political transactions take place is the legislature, or whether the key actors are party leaders (or governors).

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

• Combined, these perspectives offer a good view of complex world of policymaking, and the politics involved.

Cross-Sectional Analysis

Some results

Some results from cross-section analysis• High-quality policies are associated with:

– Congress with good policy capabilities

– Political parties that are institutionalized and programmatic

– Strong bureaucracies

– Independent judiciaries

• Many of these institutional “blessings” tend to occur together.

• Impact of other institutional variables, such as presidential powers, or degree of proportionality of electoral systems, depends on interactions with other institutional dimensions.

Congressional capabilities• National legislature is natural arena for discussion, negotiation

and enforcement of political agreements.

• A legislature made up of professional legislators, with technical capabilities, with adequate organizational structures, may encourage consensual and consistent policies over time.

• We build an index of congressional capabilities, which includes:– Different measures of public perception of Congress

– Education of legislators

– Years of legislative experience

– Specialization in Committees

– A few more subjective variables

1.0

1.5

2.0

2.5

3.0

3.5

4.0

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)

Po

licy

In

dex

(1-

4 s

cal

e)

Source: Authors' compilation.

Congressional Capabilities and the Quality of Policies

Characteristics of political party systems• In some countries, political parties play key role in defining

policy programs, engage effectively in public policy debates.

• In others, party systems affect the PMP indirectly, influencing executive-legislative relations, possibilities for coordination in Congress, incentives of elected officials, etc.

• Institutionalized parties, when they are programmatic (competing on basis of public policies and policy outcomes) are more likely to encourage long horizons, and prevent opportunistic behavior.

• They can facilitate inter-temporal bargains within and between parties, since commitments made by current party leaders are more likely to be respected in the future.

Party System Institutionalization, Programmatic Orientation and the Quality of Policies

Venezuela

Uruguay

Peru

Paraguay

Panama

Mexico

Honduras

Guatemala

El Salvador

Ecuador

Dominican Rep.

Costa RicaColombia

Chile

Brazil

Bolivia

Argentina

0

1

2

3

4

5

6

7

8

40 50 60 70 80Institutionalization Index (0-100 scale)

Pro

gra

mm

atic

In

dex

(0-

8 s

cale

)

Policy Index = 2.06

Policy Index = 2.57

Policy Index = 2.04

Note: Boxes show the average value of the Policy Index for the countries in each quadrant.

Source: Authors' compilation and Jones (2005).

Policy Index = "High" Policy Index = "Low" Policy Index = "Medium" Policy Index = "Very high"

Judiciaries and Bureaucracies• Good enforcement and implementation facilitate cooperation,

strengthen quality of policies.• Judiciary most obvious enforcer. Independent courts ensure that

the president does not overstep his boundaries, and that neither branch violates the constitution.

• Inter-temporal cooperation hindered if courts are not independent, actors are not held to their commitments.

• Bureaucracy plays a predominant role in policy implementation.• But a strong bureaucracy can also facilitate inter-temporal

bargains. Delegation to an independent bureaucracy can help enforce inter-temporal implementation of political and policy agreements (Independent central banks, autonomous agencies).

Judicial Independence and the Quality of Policies

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Judicial Independence Index (1-7 Scale)

Po

licy

In

dex

(1-

4 S

cale

)

Source: Authors' compilation and World Economic Forum (2004).

Development of Civil Service and the Quality of Policies

1.0

1.5

2.0

2.5

3.0

3.5

4.0

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)

Po

licy

In

dex

(1-

4 s

cale

)

Source: Authors' compilation and Iacoviello and Zuvanic (2005).

Source: Authors' compilation; Jones (2005); Iacoviello and Zuvanic (2005) and World Economic Forum (2004).

Note; dark bue is high, light blue is medium, white is low in each institutional dimension.

Political Institutions and the Quality of PoliciesCountry by Policy Index level

Congress Index

Judicial independ.

Party system institut.

Programmatic parties

Development of civil service

VERY HIGH

Chile H 4.60 65 8.00 0.59HIGH

Brazil H 3.90 59 2.00 0.68Colombia H 3.10 60 0.00 0.47Costa Rica M 3.80 61 1.00 0.49El Salvador M 2.90 66 7.00 0.11Mexico M 3.30 67 2.00 0.40Uruguay H 4.80 76 7.00 0.48

MEDIUMBolivia M 1.70 56 0.00 0.24Dominican Rep. L 3.60 74 0.00 0.28Honduras L 1.90 68 2.00 0.16Peru L 1.90 53 0.00 0.16

LOW

Argentina L 1.80 62 2.00 0.50Ecuador M 1.90 53 1.00 0.18Guatemala L 2.20 48 0.00 0.21Nicaragua M 1.60 0.19Panama M 2.20 67 0.00 0.08Paraguay M 1.40 64 1.00 0.16Venezuela M 1.20 55 0.00 0.37

Institutional blessings are not independent• “Good” institutions tend to come together. Countries with

stronger congresses tend to have more independent judiciaries.

• Both variables reflect equilibrium behavior of a number of political actors.

• Virtuous dynamics: If executives do not tinker with the Courts, this increases its independence and reputation. Independent judiciaries enforce the domain and prerogatives of Congress, increases incentives of legislators to invest in capabilities.

• Vicious dynamics can also occur, unfortunately.

• Problem: strong institutions take time to build, but can be destroyed overnight.

Policymaking in specific countries:

Contrasting the cases of Brazil and Ecuador

Policymaking in fragmented party systems: Brazil and Ecuador

• Political institutions have important common elements

• Most fragmented party systems in Latin America

Source: Jones (2005).

Political Party Fragmentation

1 2 3 4 5 6 7 8

Chile

Honduras

Nicaragua

Dominican Republic

Paraguay

Uruguay

Mexico

Panama

Costa Rica

Argentina

Guatemala

El Salvador

Peru

Venezuela

Colombia

Bolivia

Ecuador

Brazil

Effective Number of Legislative Parties

Brazil and Ecuador: party system fragmentation

ArgentinaHonduras

Chile

Costa Rica

El Salvador

Colombia

Bolivia

Brazil

Ecuador

Uruguay

Venezuela

Paraguay

Panama

Nicaragua

Guatemala

Dominican Republic

Mexico

Peru

10

20

30

40

50

60

0 2 4 6 8 10

Effective Number of Parties

Pre

sid

ent'

s C

ham

ber

Co

nti

ng

ent

Source: Jones (2005), Saiegh (2005).




• Strong presidential constitutional powers (to compensate for weak partisan powers)

Source: Payne and others (2002).

Presidential Legislative Powers

0.0 0.2 0.4 0.6 0.8 1.0

Nicaragua

Paraguay

Costa Rica

Bolivia

Mexico

Honduras

Dominican Republic

Guatemala

Venezuela

El Salvador

Uruguay

Panama

Argentina

Peru

Colombia

Ecuador

Brazil

Chile

Presidential Legislative Powers index (0-1 scale)





• Legislators elected under similar electoral rules: open list, PR, incentives to deliver benefits to their jurisdictions.





• Legislators elected under similar electoral rules: open list, PR, incentives to deliver benefits to their jurisdictions.

• Yet completely different political and policy outcomes

Key features of public policy and overall index

LLMLMLLVenezuela

HMMMHHHUruguay

MMMMMMMPeru

LLLLLLMParaguay

LLLLMLMPanama

LMLLMMMNicaragua

HHMMHMHMexico

MMLMMMHHonduras

LMLMLMMGuatemala

HHMMHHHEl Salvador

LLLLLMLEcuador

MMLMMMMDominican Rep

HHHMHMHCosta Rica

HMMMHHHColombia

VHHHHHHHChile

HMMHHHHBrazil

MMMMMHMBolivia

LLMLLMLArgentina

Policy IndexEfficPublic RegCoord / Coherence

Impl/EnfAdaptStabCountry

How can these differences be explained?

• Substantial differences in capabilities of key institutions.

• Brazil has congress with good policymaking capabilities, strong bureaucracy, and fairly independent judiciary.

• Ecuador lacks all of the above.

Source: Saiegh (2005)

Lower House Reelection Rates

0 10 20 30 40 50 60 70

Rates of Immediate Reelection to the Lower House (percentage)

Peru (2001)

Argentina (1989-2003)

Guatemala (1994-2004)

Venezuela (1989-2004)

Bolivia (2002)

Ecuador (1996-2002)

El Salvador (2003)

Colombia (1990-98)

Paraguay (1998-2003)

Brazil (1995-2002)

Panama (1999)

Uruguay (1989-99)

Chile (1993-2001)

Judicial Independence Index

1 2 3 4 5

Venezuela

Paraguay

NicaraguaBolivia

Argentina

Ecuador

HondurasPeru

GuatemalaPanama

El Salvador

Colombia

MexicoDominican Rep.

Costa RicaBrazil

Chile

Uruguay

Source: World Economic Forum (2004).

Index of Development of the Civil Service

0.0 0.2 0.4 0.6 0.8 1.0

Panama

El Salvador

Honduras

Paraguay

Peru

Ecuador

Nicaragua

Guatemala

Bolivia

Dominican Rep.

Venezuela

Mexico

Colombia

Uruguay

Costa Rica

Argentina

Chile

Brazil

Source: Iacoviello and Zuvanic (2005).



• Brazil has congress with good policymaking capabilities, strong bureaucracy, and fairly independent judiciary

• Ecuador lacks all of the above

• Presidents in Brazil have necessary tools to engage in political exchanges with other parties, and sustain coalitions in Congress.



• Brazil has congress with good policymaking capabilities, strong bureaucracy, and fairly independent judiciary

• Ecuador lacks all of the above

• Presidents in Brazil have necessary tools to engage in political exchanges with other parties, and sustain coalitions in Congress

• In Ecuador, coalitions are fickle, and tend to collapse as presidential terms progress and elections approach.

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 he 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 (others include ministries, and high level positions in bureaucracy).

• These exchanges work within context of a repeated game between players with relatively long horizons.

Ecuador: ghost coalitions• None of these mechanisms work well in Ecuador.• Legislators have incentives to deliver investment projects to their

communities, but president does not have similar budget discretion.• Public positions in the bureaucracy, ministries not a very valuable

inducement, particularly toward end of the presidential period.• Being perceived as “gobiernista” is politically costly.• 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.

Ecuador: Size of Government’s Coalition in Congress over the presidential term (1984-2002)

10

20

30

40

50

60

1 5 9 13 17 21 25 29 33 37 41 45

Administration's months in office

Siz

e o

f th

e P

resi

den

t's

coal

itio

n (

per

cen

t)

Source: Mejía-Acosta (2004).





towards the end of the presidential term.• Result: unstable coalitions, adversarial relations between the

executive and the legislature, and a great deal of political instability.





towards the end of the presidential term.• Result: unstable coalitions, adversarial relations between the

executive and the legislature, and a great deal of political instability.• Last three elected presidents unable to complete terms. Short time

horizons reflected in quality of public policies.

Main messages

Main messages1. Processes matter!

2. Beware of universal policy recipes that are supposed to work independently of the time and place in which they are adopted.

3. Certain key features of public policies may be as important in achieving development goals as their content and orientation.

4. The effect of political institutions on policymaking processes can be understood only in a systemic manner.

5. Political and institutional reform proposals based on broad generalizations are not a sound reform strategy.

6. Policy or institutional reforms that have important feedback effects on the policymaking process should be treated with special care, and with an understanding of the potential ramifications.

Main messages7. The ability of political actors to cooperate over time is a key

determinant of the quality of public policies.

8. Effective political processes and better public policies are facilitated by political parties that are institutionalized and programmatic, legislatures that have sound policymaking capabilities, judiciaries that are independent, and bureaucracies that are strong.

9. Most of these “institutional blessings” are not granted overnight. Building them, and keeping them in place, depends on the political incentives of key political actors

10. Leadership, if functional, can be a vital force for institution-building

motivation

Documents

countries policies

quality of public policies

content of policies

bad policies

effective public policies

policy reforms

policy implications

policy outcomesliterature