This dissertation analyzes various issues in Political Economy. In the first chapter, I revisit the issue that has been popularly debated, namely whether corporations affiliated in business groups build stronger ties to the government. With the focus on the Japanese political economy, this chapter theoretically and empirically investigates how a firm's incentive to build political connections is affected by its ownership structure. I first show that intercorporate stockholding encourages the equity issuer to build political network if the equity holder exercises non-trivial controlling power over the equity issuer, but discourages it otherwise. Next, I analyze a large data set of Japanese corporations publicly traded from 1991 to 2003. The empirical analysis confirms the theoretical predictions: the number of retired elite bureaucrats in a private firm's board of directors, which is a measure of political connection of the firm, increases as the share of equity held by non-financial firms (friendly shareholders) decreases or as that by financial institutions (controlling shareholders) increases. These findings suggest that companies affiliated to business groups, in contrast to popular belief, might build relatively weaker political connections.By reinterpreting Jean-Jacques Rousseau who considered self-government and self-regulation of people as the fundamental problem of politics, the second chapter explores several fundamental issues of political economy including how to allocate resources to achieve efficient self-regulation, how the agency problems in different parts of a society interact each other, and why the governments of poor societies work so poorly. The analysis shows that once a society is sufficiently developed in economic and political spheres, the agency problem on the citizens' side becomes negligible, in which case citizens (and researchers) can entirely focus on the issue of government accountability. When a political community is economically and politically poorly developed, however, the agency problem on the citizens' side exacerbates agency problems of other parts of the society. Therefore, in such a case one should explicitly take the problem of self-regulation of the citizens as an integrated part of the entire political economic system.In the last chapter, I develop a spatial voting model in which political elites play an active role in increasing or decreasing polarization. Key assumptions are: (i) voters respond to changes in policy positions of parties only if they pay attention to politics; (ii) political elites can disinterest a specific group of voters away by making the voters believe that implemented policies will be less preferable to them. Under intermediate range of parameters, the model generates multiple equilibria, i.e. political elites can choose whether to polarize their policy platforms or not. Either when economic inequality sufficiently grows or when media tend to mobilize partisans sufficiently more than they do centrists, polarization becomes the unique equilibrium.
Read
