nep-pol New Economics Papers
on Positive Political Economics
Issue of 2005‒09‒11
five papers chosen by
Eugene Beaulieu
University of Calgary

  1. Diversity and Redistribution By Raquel Fernández; Gilat Levy
  2. A theory of political cycles By Leonardo Martinez
  3. Human capital and political business cycles By Akhmedov Akhmed
  4. What Buys Happiness? Analyzing Trends in Subjective Well-Being in 15 European Countries, 1973-2002 By Christian Bjørnskov; Nabanita Datta Gupta; Peder J. Pedersen
  5. Did Political Constraints Bind During Transition? Evidence from Czech Elections 1990-2002 By Orla Doyle; Patrick Paul Walsh

  1. By: Raquel Fernández; Gilat Levy
    Abstract: This paper examines how preference heterogeneity affects the ability of the poor to extract resources from the rich. We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality. Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members). The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated and a series of taxes whose revenue is used to fund specific (targeted) goods. We show that taste conflict first dilutes but later reinforces class interests. When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers. As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution. As diversity increases further, however, only general redistribution survives.
    JEL: D30 D72
    Date: 2005–08
  2. By: Leonardo Martinez
    Abstract: The literature on political cycles argues that the proximity of elections affects policy choices. This literature considers that opportunistic policymakers manipulate policy to increase their reelection probability. Previous theoretical studies assume that the policymaker can affect his reelection probability only with his last decision before the election. This assumption seems extreme, and directly produces a cycle without presenting a theory of why a policymaker's behavior is different closer to the election. We shall explain how, without this assumption, existing political-agency models can still produce cycles. In contrast to previous (theoretical and empirical) studies, we consider how the policymaker's decisions depend on his reputation (the beliefs about his future performance). Since the policymaker's reputation most likely changes over time, in general, one cannot conclude from observing the same behavior throughout the policymaker's term that the proximity of elections does not affect policy choices. Consequently, our findings suggest reinterpreting previous empirical results and controlling for changes in reputation in future empirical studies. More generally, our results deepen the understanding of agency relationships in which the agent's compensation is decided infrequently.
    Keywords: Political science
    Date: 2005
  3. By: Akhmedov Akhmed
    Abstract: In this project, we propose an alternative explanation of the phenomenon of political business cycles — human capital of government. We propose an illustrative model in the framework of term limits. The predictions of the model will be tested on the basis of fiscal and monthly economic performance data of Russian regions from 1996 to 2003.
  4. By: Christian Bjørnskov (Aarhus School of Business); Nabanita Datta Gupta (Danish National Institute of Social Research and IZA Bonn); Peder J. Pedersen (University of Aarhus, Danish National Institute of Social Research and IZA Bonn)
    Abstract: Trends in life satisfaction are examined across 15 European countries employing a modified version of Kendall’s Tau. Analyses show that GDP growth relative to growth in the preceding period is a significant determinant of the trends; the same holds for the growth in life expectancy while the contemporaneous growth in the current account balance exerts a positive influence. Relative unemployment growth becomes significant when interacted with a measure of the long-run political ideology of the median voter. The effects of relative GDP growth vary with the political ideology variable.
    Keywords: subjective well-being, economic factors
    JEL: I31
    Date: 2005–07
  5. By: Orla Doyle (University College Dublin); Patrick Paul Walsh (Trinity College Dublin and IZA Bonn)
    Abstract: Many theoretical models of transition are driven by the assumption that economic decision making is subject to political constraints. In this paper we empirically test whether the winners and losers of economic reform determined voting behaviour in the first five national elections in the Czech Republic. We propose that voters, taking stock of endowments from the planning era, could predict whether they would become "winners" or "losers" of transition. Using survey data we measure the percentage of individuals by region who were "afraid" and "not afraid" of economic reform in 1990. We define the former as potential "winners" who should vote for pro-reform parties, while latter are potential "losers" who should support leftwing parties. Using national election results and regional economic indicators, we demonstrate that there is persistence in support for pro-reform and communist parties driven by prospective voting based on initial conditions in 1990. As a result, we show that regional unemployment rates in 2002 are good predictors of regional voting patterns in 1990.
    Keywords: political constraints, prospective economic voting, initial conditions
    JEL: D72 E24 E61
    Date: 2005–07

This nep-pol issue is ©2005 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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