My research intersects the fields of comparative and international political economy.  The first project I have developed examines the changing boundary between state and market responsibilities in the area of old age pension provision. This project culminated in a book manuscript that is under review. The second project examines the linkages between globalization and domestic political processes.  One article in this vein uses a transitional costs framework to explain why globalization, paradoxically, can itself sometimes impede the adoption of market-oriented reforms in the most vulnerable developing countries. Subsequent articles focus on modeling the interdependent mechanisms through which market-based policy models diffuse across nations, testing both coercive and learning processes through which domestic political choices across nations are linked. The methodological approaches I use vary from qualitative comparative analysis based on extended field research, to large-N cross-national analyses using selection models, time series and tobit, as well as event history and competing risks models.

Project I:  Explaining Changes in the Public-Private Divide

The first part of my ongoing research program seeks to explain differences across nations in the degree to which governments are shifting responsibility for old age income provision from public and collective to individual, market-based pension schemes. This project brings together systematic cross-national analysis of the likelihood and degree of privatization, and structured qualitative comparison of the causal processes explaining observed differences in the nature and magnitude of structural pension reform adopted across nations.

The first major work in this project is a quantitative analysis of the likelihood and degree of pension privatization around the world (Comparative Political Studies, 2002). The degree of structural reform is measured as the public-private ‘mix’ in reformed pension institutions.  This index was developed as part of a collaborative project with Estelle James to study the political economy of structural pension reform around the world (Stiglitz and Holzmann, eds. 2001, New Ideas about Old Age Security). Using a Heckman selection model to remedy the problem of sample-selection bias plaguing much research on pension and social welfare reform, I explain variations in the public-private balance of old age pension benefits adopted across privatizing nations. The analysis reveals systematic links between the domestic political, economic and institutional structures, and the likelihood and degree to which nations adopt individual, market-based pension reforms.

The principal work growing out of this stream of research is a book manuscript, Social Protection and the Market: The Making of Latin American Pension Reform.  Social Protection and the Market addresses one of the most central issues in comparative political economy and the study of institutions more generally: when do institutions that have long remained stable become subject to deep path-departing change?  As demographic and economic change have increased the financial pressures on state welfare institutions, questions of institutional reform have risen to the top of political agendas around the world. The shift from state to market-based organization of social protection is highly consequential from a distributive, political and economic perspective.  At its base, privatization transfers the risks and costs of aging and increasingly-uncertain economic trends from society as a whole, which is the sponsor of state social insurance programs, to individuals, who under private pension systems must save for their own retirement.  As economic integration expands the array of macroeconomic risks to which income earning capacity is subject, the transfer of these risks fully or partially to the shoulders of individuals threatens to cleave societies deeply along the lines of income security and risk-bearing capacity. 

The book develops a theory of path-departing institutional change through analysis of the political economy of pension privatization. Between 1980 and 2004 twenty four governments around the world, from South America to Scandinavia and Central Asia implemented some form of pension privatization while six corresponding measures are scheduled for implementation in 2005. More than half of these reforms are located in Latin America. The scope of institutional change effected through privatization has varied markedly around the world, providing evidence of unique outcomes to distributive conflict over what is the largest single public social welfare program in many countries. While some research on welfare state restructuring in the advanced industrial nations has begun to address the questions of when and how structural changes in social protection occur, very little is known about the transformation of the welfare state in the developing world, despite its critical role in shaping the life chances of considerable portions of the world’s population.

Social Protection and the Market provides a politically-grounded theoretical and empirical account of which governments privatize and when such reforms will endure. Among privatizing countries the empirical model explains variations in the degree of change to market-based structures that they adopt.  The analysis focuses principally on the developing world, but addresses these theoretical and empirical puzzles by employing a global data set that measures of the degree of structural pension reform adopted around the world.  I join quantitative, cross-national analysis of the likelihood and degree of pension privatization around the world, with qualitative paired comparisons of pension reform processes in four Latin American democracies: Argentina, Mexico, Brazil, and Uruguay. Causal evidence draws upon field research between 1998 and 2003 and interviews with more than 150 politicians, technocrats and other participants in the pension reform processes in the four countries. 

  The central argument of Social Protection and the Market is that pension privatization emerges from political conflict, rather than from exogenous pressures that overwhelm the processes of institutional stability.  Such conflicts give way to deep institutional change when reformers can sever the material bases for consent to the existing social bargain, viz., the belief that citizens will receive their ‘due’ pension in exchange for contributions to the existing system. Where such institutional changes endure, consent to the new social bargain is forged not just on expected gains from the new system, but also on the belief that the reformed system is ‘fair.’ Whether and how tightly-held beliefs about the effectiveness and fairness of existing pension systems are politicized in conflicts over social security reform thus put critical limits on the terms on which such consent may be won, and thus the prospects for institutional change.

The first part of the study maps the empirical landscape and tests competing hypotheses of structural reform. Quantitative analysis of the likelihood and degree of structural pension reform adopted around the world disentangles the systematic from random patterns, discards spurious correlations that do not stand up to systematic control, and lays out a map for the development of causal theory.  The second part of the book develops the theory of institutional path departure. The theoretical account of institutional change has three principal components.  It begins with an analysis of the technocratic process of paradigm change. I examine ways in which pressures from international financial markets have generated often-contradictory rewards and punishments for developing country governments to embrace market-oriented structural reform such as that of old-age pensions.  The next step looks to the ways in which institutional legacies provide barriers to, or opportunities for, root-and-branch restructuring of social security systems. Here I view institutional legacies not simply as structural or objective features of old age pension systems, but also as distinctly political and changeable, or ‘living’ features of an institutional legacy such as public perceptions of the fairness and performance of the institution.  I examine how, within political conflicts over privatization, such legacies can permit, or even promote path-departing institutional change. Finally, I turn to the legislative arena, where I lay out a theory to explain the career interests of democratically-accountable legislators will be compatible with the decision to vote for a redistributive reform such as pension privatization. I argue that the effects of political institutions (e.g., partisanship, fragmentation, veto-players, etc.) are conditioned by whether reform is politicized in redistributive or distributive terms.

Part three of the study brings evidence to support these causal arguments through structured comparative analysis of pension reform experiences in four Latin American nations: Argentina, Brazil, Mexico and Uruguay. This part of the study employs structured cross-national and inter-temporal comparative analysis of the process of structural pension reform to bring evidence to the causal argument, and to highlight both systematic and unique country-specific causal forces in the politics of pension reform. The analysis of the causal arguments in the four countries is followed by a re-examination of the partial roll-back of the Argentine pension reform in 2002, from which I assess further implications of my political theory of institutional change for the long-term stability of path departures such as pension privatization.

Project II:  Rethinking Global Forces in Domestic Politics

My second major research program challenges conventional views of the monolithic or homogenizing pressures associated with economic globalization, and the implications of such forces for domestic political decisions. In the first paper of this research program, (World Politics, April 2004) I argue that market pressures interact with domestic economic conditions in developing nations to generate a ‘double bind’ for government actors: while capital-scarce governments face powerful long-term incentives to adopt market-oriented reform, if the short-term costs of reforms are high, international market pressures may impede, rather than promote, their adoption. Examining two decades of capital account liberalization in Latin America and the OECD, I show that whereas financial weakness is associated with greater movements toward capital account opening among the rich nations, where both costs and constraints are limited, the reverse is true in Latin America. Despite having the most to gain from international financial liberalization, developing nations with weaker domestic financial sectors face higher risks of transitional dislocations following liberalization and move less aggressively toward openness.

The second part of this research program questions the assumption of independence in market-oriented policy reforms sweeping the world, seeking instead to model the interdependent sources of policy change.  In the first article in this vein (International Studies Quarterly, 2005) I use a duration model to test the hypothesis that decisions to adopt a market-oriented model of pension reform in one country are systematically linked to similar decisions in peer nations. I evaluate this hypothesis alongside those that may explain policy adoption as the outcome of coercion by international financial institutions, domestic political designs and economic and demographic processes. I find strong evidence to suggests that the diffusion of policy change has occurred through the mechanism of information derived from peer adoption, and that the force of this mechanism has varied across groups of peer nations. In a qualitative comparative analysis, I examine the World Bank involvement in structural pension reform, providing evidence from four Latin American cases to demonstrate the nature and limits of the role of international financial institutions in the diffusion of policy models across borders (in Weyland, ed., Learning from Foreign Models in Latin American Policy Reform.)  I also examine the politics of adoption and diffusion of a relatively new model of structural pension reform, the notional, or non-financial defined contribution (NDC) pension reform. This paper, co-authored with R. Kent Weaver, was published as part of a World Bank volume on NDC pension reforms (Holzmann and Palmer, Eds., 2005. Non-Financial Defined Contribution (NDC) Pension Scheme.,)

The next paper in this research program uses a competing risks framework to demonstrate how the mechanisms of diffusion vary across two policy models that differ in the timing and nature of their political and economic costs and rewards ("Competitive Diffusion").  The next paper in this stream of research was written for the 2005 American Political Science Association meeting and is now under review (“International Institutions, Global Capital and Pension Reform in Latin America.”) The paper challenges extant theories about the role of global economic forces, including mobile capital and international financial institutions, in Latin American pension reform.  I will write the next paper in this research program during the Winter and Spring of 2006 and will present it at a conference in April. The paper examines the politics of pension reform in post-communist countries of Eastern Europe and Central Asia.  

The most recent paper in this research program, “Capital, Trade, and the Political Economies of Economic Reform,” (co-authored with Marcus Kurtz), bridges research in comparative political economy through analysis of financial and trade liberalization in Latin America. Theoretically, the analysis moves beyond the common tendency to combine the politics of economic liberalization into a single concept, resolving at once the empirical disputes emerging from analyses of disparate sectors of policy reform.  The analysis yields a systematic logic that explains these differences by emphasizing the effect of information environment, timing of reform costs and distributional impact of different policy measures. Cross-sectional time series analysis reveals how economic contexts, partisan and institutional dynamics mediate both the timing and salience of reform costs, possibilities for blame avoidance, and thus the varied movements toward market-oriented reform across policy areas.  the implications of the timing of cost and benefit accrual and time horizons of political and economic actors on the politics of structural reform in a variety of areas such as trade opening, privatization of state-owned enterprises and labor market liberalization. The paper was presented at the 2005 meeting of the American Political Science Association in Washington, D.C, and is currently under review.

Project III.  The Politics of Risk Protection

The next step in my research program moves beyond questions of the public – private divide to examine structural changes in the way in which risks are apportioned through collective or individual mechanisms in society. Just as economic and demographic transformations have expanded the nature and incidence of risks faced by citizens around the world, the ways in which such risks are apportioned across societies are changing dramatically – with significant political consequences. From risks to personal security or property, employment or income, individuals may be thought to possess a ‘portfolio’ of risk-hedging mechanisms. Whereas some risks are typically pooled through institutions such as families, trade groups, mutual aid associations or neighborhoods, others are institutionalized by means of state services (education, training, preventive or palliative health care), protections (from trade competition, foreign invasion or domestic criminal activity) and insurance (for unemployment, disability, old age or ill health). Yet, just as economic liberalization, changing family and demographic profiles intensify and expand the nature of risks that individuals confront, the mechanisms through which these risks have been reapportioned across groups have been eroding. As a consequence, institutional means through which economic, social and demographic risks are shared broadly in society have steadily given way to policies and practices that force individuals to bear those risks alone. In 2006 I will seek funding to begin a project that models and explains the political causes of these shifts in risk-pooling mechanisms, and the political and distributive consequences of this trend.