nep-pol New Economics Papers
on Positive Political Economics
Issue of 2005‒04‒03
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Constitutions, Politics and Economics: A Review Essay on Persson and Tabellini's "The Economic Effect of Constitutions" By Daron Acemoglu
  2. Consistent Representative Democracy By Chambers, Christopher P.
  3. An axiomatic theory of political representation By Chambers, Christoper P.
  4. A Theory of Influence: The Strategic Value of Public Ignorance By Isabelle Brocas; Juan D. Carillo
  5. The Economic Case for Fiscal Federalism in Scotland By Ronald MacDonald; Paul Hallwood
  6. The Struggle over Migration Policy By Epstein, Gil S.; Nitzan, Shmuel
  7. On Committees of Experts By Bauke Visser; Otto H. Swank
  8. The Interaction of Tax Exemptions and Individual Tax Reform Preferences By Salvatore Barbaro; Jens Südekum
  9. God and the Global Economy: Religion and Attitudes Toward Trade and Immigration in the United States By Joseph Daniels; Marc von der Ruhr

  1. By: Daron Acemoglu
    Abstract: In this essay I review the new book by Torsten Persson and Guido Tabellini, The Economic Effects of Constitutions, which investigates the policy and economic consequences of different forms of government and electoral rules. I also take advantage of this opportunity to discuss the advantages and disadvantages of a number of popular empirical strategies in the newly emerging field of comparative political economy.
    JEL: P16 O10
    Date: 2005–03
  2. By: Chambers, Christopher P.
    Abstract: We study axioms which define "representative democracy" in an environment in which agents vote over a finite set of alternatives. We focus on a property that states that whether votes are aggregated directly or indirectly make no difference. We call this property 'representative consistency'. 'Representative consistency' formalizes the idea that a voting rule should be immune to gerrymandering. We characterize the class of rules satisfying 'unanimity, anonymity,' and 'representative consistency'. We call these rules "partial priority rules." A partial priority rule can be interpreted as a rule in which each agent can "veto" certain alternatives. We investigate the implications of imposing other axioms to the list specified above. We also study the partial priority rules in the context of specific economic models.
    Keywords: social choice, representative systems, majority rule, gerrymandering
    Date: 2005–03
  3. By: Chambers, Christoper P.
    Abstract: We discuss the theory of voting rules which are immune to gerrymandering. Our approach is axiomatic. We show that any rule that is unanimous, anonymous, and representative consistent must decide a social alternative as a function of the proportions of agents voting for each alternative, and must either be independent of this proportion, or be in one-to-one correspondence with the proportions. In an extended model in which voters can vote over elements of the unit interval, we introduce and characterize the quasi-proportional rules based on unanimity, anonymity, representative consistency, strict monotonicity, and continuity. We show that we can always (pointwise) approximate a single-member district quota rule with a quasi-proportional rule. We also establish that upon weakening strict monotonicity, the generalized target rules emerge.
    Keywords: gerrymandering, representative systems, proportional representation, social choice, quasi-arithmetic means
    Date: 2005–03
  4. By: Isabelle Brocas; Juan D. Carillo
    Abstract: We analyze an agency model where one individual decides how much evidence he collects. We assume that he has free access to information, but all the news acquired become automatically public. Conditional on the information disclosed, a second individual with conflicting preferences undertakes an action that a ects the payo of both agents. In this game of incomplete but symmetric information, we show that the first individual obtains rents due to his superior ability to decide whether to collect or forego evidence, i.e., due to his control in the generation of (public) information. We provide an analytical characterization of these rents, that we label “rents of public ignorance”. They can be interpreted as, for example, the degree of influence that a chairman can exert on a committee due exclusively to his capacity to decide whether to keep discussions alive or terminate them and call a vote. Last, we show that similar insights are obtained if the agent decides first how much private information he collects and then how much of this information he transmits to the other agent.
    Keywords: principal-agent, incomplete and symmetric information, learning, experimentation, optimal stopping rule, informational rents, information control, public ignorance
    Date: 2005–01
  5. By: Ronald MacDonald (University of Glasgow); Paul Hallwood (University of Connecticut)
    Abstract: In this paper we consider the case for assigning tax revenues to Scotland, by which we mean that taxes levied on Scottish tax bases should be returned to the Scottish budget. The budget, however, would continue to be supplemented by transfers from the Westminster budget. This arrangement differs from the current situation whereby public spending is largely financed by a bloc grant from Westminster. Our suggestion falls short of full fiscal federalism for Scotland . meaning that Scotland had control over choice of tax base and of tax rates, and fiscal transfers from Westminster would be minimal. We use propositions drawn from the theory of fiscal federalism to argue for a smaller vertical imbalance between taxes retained in Scotland and public spending in Scotland. A closer matching of spending with taxes would better signal to beneficiaries the true costs of public spending in terms of taxes raised. It would also create more complete incentives for politicians to provide public goods and services in quantities and at qualities that voters are actually willing to pay for. Under the current bloc grant system, the marginal tax cost of spending does not enter into political agents. calculations as spending is out of a fixed total budget. Moreover, the Scottish electorate is hindered in signaling its desire for local public goods and services since the size of the total budget is determined by a rigid formula set by Westminster. At the present time we reject proposals for full fiscal federalism because in sharply reducing vertical imbalance in the Scottish budget, it is likely to worsen horizontal balance between Scotland and the other UK regions. Horizontal balance occurs where similarly situated regions enjoy the same per capita level of public goods and services at the same per capita tax cost. The complete removal of the bloc grant under full fiscal federalism would remove the mechanism that currently promotes horizontal equity in the UK. Variability in own-source tax revenues creates other problems with full fiscal federalism. Taxes derived from North Sea oil would constitute a large proportion of Scottish taxes, but these are known to be volatile in the face of variable oil prices and the pound-dollar exchange rate. At the present time variability in oil tax revenue is absorbed by Westminster. Scotland is insulated through the bloc grant. This risk sharing mechanism would be lost with full fiscal federalism. It is true that Scotland could turn to financial markets to tide itself over oil tax revenue downturns, but as a much smaller and less diversified financial entity than the UK as a whole it would probably have to borrow on less favorable terms than can Westminster. Scotland would have to bear this extra cost itself. Also, with full fiscal federalism it is difficult to see how the Scottish budget could be used as a macroeconomic stabilizer. At present, tax revenue downturns in Scotland - together with the steady bloc grant - are absorbed through an increase in vertical imbalance. This acts as an automatic stabilizer for the Scottish economy. No such mechanism would exist under full fiscal federalism. The borrowing alternative would still exist but on the less favorable terms - as with borrowing to finance oil tax shortfalls
    Keywords: Barnett formula, bloc grants, devolution, fiscal federalism, local public goods, oil taxes, regional economics, Scottish economy, soft budget constraint, tax assignment, UK economy, UK fiscal system.
    JEL: E62 H1 H61 H7 H87
    Date: 2004–07
  6. By: Epstein, Gil S. (Bar-Ilan University, CEPR and IZA Bonn); Nitzan, Shmuel (Bar-Ilan University)
    Abstract: In this paper we analyze the endogenous determination of migration quota viewing it as an outcome of a two-stage political struggle between two interest groups: those in favor and those against the proposed migration quota. We first compare the proposed policies of the two interest groups under random behavior of the government, with and without lobbying. The paper proceeds with the examination of the effect of government intervention in the proposal of the quota on its nature, assuming that, with and without government intervention, the uncertain approval of the proposal is the outcome of a lobbying contest between the two interest groups. Finally, we examine the effect that the status-quo policy has on the proposed government's policy.
    Keywords: migration quota, interest groups, government intervention
    JEL: J61 J81
    Date: 2005–03
  7. By: Bauke Visser (Faculty of Economics, Erasmus Universiteit Rotterdam); Otto H. Swank (Faculty of Economics, Erasmus Universiteit Rotterdam)
    Abstract: We consider a committee that makes a decision on a project on behalf of 'the public'. Members of the committee agree on the a priori value of the project, and hold additional private information about its consequences. They are experts who care both about the value of the project and about being considered well informed. Before voting on the project, members can exchange their private information simultaneously (so no herding). We show that reputational concerns make the a priori unconventional decision more attractive and lead committees to show a united front. These results hold irrespective of whether information can be manipulated or not. Next, we show that reputational concerns induce members to manipulate information and vote strategically if their preferences differ considerably from those of the member casting the decisive vote. Our last result is that the optimal voting rule balances the quality of information exchange and the alignment of interests of the decisive voter with those of the public.
    Keywords: Committees; communication; reputational concerns; strategic voting
    JEL: D71 D72 D82
    Date: 2005–03–10
  8. By: Salvatore Barbaro (University of Mainz); Jens Südekum (University of Konstanz and IZA Bonn)
    Abstract: The individual voting behavior on the abolishment of single income-tax exemptions crucially depends on how strongly agents are affected by other deduction possibilities that are not at stake in the reform plans of the government. The interactions depend (i) on the shape of the tax schedule, and (ii) on how the government wants to use the revenue that is generated by the cut of tax privileges. If government plans to increase redistribution in form of lump-sum transfers, then the political chances of a tax reform increase with the existence of other deduction possibilities under progressive taxation. With proportional taxation and a budgetenlargement policy, the voting decision depends only on the particular tax privileges at stake. Matters are different if the government wants to adopt a revenue-neutral tax-cut-cum-basebroadening policy. Except for strong progression, it is less likely that an agent supports the elimination of tax privileges the stronger she is affected by other exemptions in the back.
    Keywords: income tax reform, public choice
    JEL: D72 D74
    Date: 2005–03
  9. By: Joseph Daniels (Department of Economics, Marquette University); Marc von der Ruhr (Department of Economics, Saint Norbert College)
    Abstract: Using the results of a national identity survey, we test the impact of religious affiliation on trade and immigration-policy preferences of U.S. residents while controlling for individual level of skill, political ideology, and other important demographic characteristics. Our results show that religion is an important determinant of international-policy preferences as individuals who are pre-Vatican II Catholic or members of fundamentalist Protestant are more likely to prefer policies that restrict imports and immigration. Religiosity, in contrast, has a seperate efect on moderating attitudes toward immigration. In addition, we find evidence of denominational effects among African Americans in that members of fundamentalist denominations tend to favor policies that restrict imports while others do not, implying that statistical results commonly attributed to racial effects may actually be a religious effect.
    JEL: F0 H0

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