nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒01‒29
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Clientelism and Aid By Casamatta, Georges; Vellutini, Charles
  2. Learning, voting and the information trap By Aleksander Berentsen; Esther Bruegger; Simon Loertscher
  3. The Swing Voter's Curse in the Laboratory By Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R
  4. Simultaneous Elections and Economic Turnout in Spanish Regional Elections By Joan Costa i Font; Ricard Ramon-Sumoy
  5. Political Competition and Convergence to Fundamentals: With Application to the Political Business Cycle and the Size of Government By J Stephen Ferris; Soo-Bin Park; Stanley L. Winer
  6. Political Involvement and Memory Failure as Interdependent Determinants of Vote Overreporting By Stocké, Volker; Stark, Tobias
  7. Wage Bargaining and Political Strength in the Public Sector By Torberg Falch; Bjarne Strøm
  8. Protection for Sale Made Easy By Baldwin, Richard; Robert-Nicoud, Frédéric
  9. A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labour-Scarce Economies? By Hatton, Timothy J.; Williamson, Jeffrey G

  1. By: Casamatta, Georges; Vellutini, Charles
    Abstract: Using a model of probabilistic voting, we analyse the impact of aid on the political equilibrium in the recipient country or region. We consider two kinds of politicians: the benevolent one is interested in promoting social welfare whereas the other one is clientelistic, his only goal being to maximize his chances of being elected. We find that the impact of aid on the political equilibrium and therefore on the quality of the policy (using the utilitarian social welfare as a benchmark) in the recipient country ultimately depends on the value of the elasticity of marginal consumption, which governs how the sensitivity of voters to a clientelistic allocation of resources (over a socially optimal one) varies with the level of consumption. When the elasticity is low, the probability that the clientelistic politician be elected increases and the expected policy outcome gets further away from the socially desirable policy set. This case of substitution of policy quality by aid can help to explain the poor performance of conditionality in improving policy. Perhaps more surprising is the opposite case, which arises for high values of the elasticity of marginal utility: an increase in aid worsens the clientelistic candidate’s election prospects and thus improves the expected policy set.
    Keywords: aid; clientelism; voting
    JEL: D72 H23 H41 H71
    Date: 2006–01
  2. By: Aleksander Berentsen; Esther Bruegger; Simon Loertscher
    Abstract: We consider a median voter model with uncertainty about how the economy functions. The distribution of income is exogenously given and the provision of a public good is financed through a proportional tax. Voters and politicians do not know the true production function for the public good, but by using Bayes rule they can learn from experience. We show that the economy may converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap.
    Keywords: Learning; voting and the information trap
    JEL: D72 H10 D83
    Date: 2005–04
  3. By: Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R
    Abstract: This paper reports the first laboratory study of the swing voter’s curse and provides insights on the larger theoretical and empirical literature on 'pivotal voter' models. Our experiment controls for different information levels of voters, as well as the size of the electorate, the distribution of preferences, and other theoretically relevant parameters. The design varies the share of partisan voters and the prior belief about a payoff relevant state of the world. Our results support the equilibrium predictions of the Feddersen-Pesendorfer model, and clearly reject the notion that voters in the laboratory use naïve decision-theoretic strategies. The voters act as if they are aware of the swing voter’s curse and adjust their behaviour to compensate. While the compensation is not complete and there is some heterogeneity in individual behaviour, we find that aggregate outcomes, such as efficiency, turnout, and margin of victory, closely track the theoretical predictions.
    Keywords: information aggregation; swing voter's curse; voting behaviour
    JEL: D71 D72
    Date: 2006–01
  4. By: Joan Costa i Font; Ricard Ramon-Sumoy
    Abstract: Low voter turn-out questions the legitimacy of modern democracies in pursuing some desired goals of political inclusion and legitimacy. Yet, in examining the determinants of individuals' participation, rational voting models assume that participation in elections is an exogenous feature whereby individuals participate if the net benefits are sizeable. In this paper we argue that, in certain circumstances, turn-out might be endogenously influenced by an incumbent government that is able to decide on the election date. This holds true where incumbent politicians can potentially influence the appropriate calendar of an election. In particular, we look at the influence of simultaneity in elections on voter turnout. Furthermore, we examine the role economic variables play in influencing voter turn out (economic turnout). Our data is from Spanish regional elections between 1980-1999 and we use panel data models . We define several notions of simultaneity depending on the coincidence of regional elections with alternative election dates (municipal, national and European elections). Findings point out that simultaneity systematically increases individuals average turn-out regardless of the elections considered and that economic conditions might exert some influence in the turnout in Spanish regional elections.
  5. By: J Stephen Ferris; Soo-Bin Park; Stanley L. Winer
    Abstract: We address the problem of how to investigate whether economics, or politics, or both, matter in the explanation of public policy. The problem is first posed in a particular context by uncovering a political business cycle (using Canadian data for 130 years) and by taking up the challenge to make this fact meaningful by finding a transmission mechanism through actual public choices. Since the cycle is in real growth, and it is reasonable to suppose that public expenditure would be involved, the central task then is to investigate the role of (partisan and opportunistic) political factors, as opposed to economic fundamentals, in the evolution of government size. We proceed by asking whether the data allow us to distinguish between the convergence and the nonconvergence hypotheses. Convergence means that political competition forces public spending to converge in the long run to a level dictated by endowments, tastes and technology. Nonconvergence is taken to mean that political factors other than the degree of political competition prevent convergence to that long run. The general idea here, one that may be applied in any situation where the key issue is the role of economics versus politics over time, is that an overtly political factor can be said to play a distinct role in the evolution of public choices if it can be shown to lead to departures from a dynamic path defined by the evolution of economic fundamentals in a competitive political system.
    Keywords: public expenditure, size of government, long run versus short run, opportunism, partisanship, political competition, cointegration
    JEL: H10 H30 H50
    Date: 2006
  6. By: Stocké, Volker (Sonderforschungsbereich 504); Stark, Tobias (Sonderforschungsbereich 504)
    Abstract: Survey respondents have been found to systematically overreport their participation in political elections. Although the sociodemographic correlates of this response bias are well known, only a few studies have analyzed the determinants predicted by two prominent theoretical explanations for vote overreporting: memory failure and social desirability bias. Both explanations have received empirical support in studies in which the probability of vote overreporting was found to increase (a) with the time between the election and the survey interview and (b) when respondents were more politically involved. In the present paper, we argue that the effect of each of these determinants is not simply additive, but depends on the value of the respective other factor. This interaction effect has been found with data from the American National Election Studies: The probability of vote overreporting increases significantly stronger with the respondents’ political involvement when more time has elapsed since the election day.
    Date: 2006–01–04
  7. By: Torberg Falch; Bjarne Strøm
    Abstract: This paper analysis the link between political strength and public sector wages using a unique matched individual-employer data set for Norwegian local governments during the period 1990-1998. The results indicate that political strength, measured in several ways, has a positive effect on wages, while administrative strength, measured by the tenure of the chief executive, has a negative effect. The positive effect of political strength is consistent with a model in which the budgetary process is a multistage game and employment is determined in an interaction with interest groups prior to the wage bargain.
    Keywords: public sector labor market, wage bargaining, political strength, budgetary process
    JEL: D73 H72 J45
    Date: 2005
  8. By: Baldwin, Richard; Robert-Nicoud, Frédéric
    Abstract: Formal analysis of the political economy of trade policy was substantially redirected by the appearance of Gene Grossman and Elhanan Helpman's 1994 paper, 'Protection for Sale'. Before that article a fairly wide range of approaches were favoured by various authors on various issues, but afterwards, the vast majority of theoretical tracts on endogenous trade policy have used the Protection for Sale framework (PFS for short) as their main vehicle. The reason, of course, is that the framework is both respectable - because its microfoundations are distinctly firmer than were those of the earlier lobbying approaches - and it is very easy to work with. Despite the popularity of the PFS framework, it appears that no one has presented a simple diagram that illustrates how the PFS frameworks and explains why it is so easy. This short note aims to remedy that omission.
    Keywords: endogenous protection; protection for sale
    JEL: H32 P16
    Date: 2006–01
  9. By: Hatton, Timothy J.; Williamson, Jeffrey G
    Abstract: Today's labour-scarce economies have open trade and closed immigration policies, while a century ago they had just the opposite, open immigration and closed trade policies. Why the inverse policy correlation, and why has it persisted for almost two centuries? This paper seeks answers to this dual policy paradox by exploring the fundamentals which have influenced the evolution of policy: the decline in the costs of migration and its impact on immigrant selectivity, a secular switch in the net fiscal impact of trade relative to immigration, and changes in the median voter. The paper also offers explanations for the between-country variance in voter anti-trade and anti-migration attitude, and links this to the fundamentals pushing policy.
    Keywords: history; immigration restriction; policy; tariffs
    JEL: F22 J1 O1
    Date: 2006–01

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