nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒03‒18
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Does illegal immigration empower rightist parties? By Ángel Solano García
  2. Condorcet Cycles? A Model of Intertemporal Voting By Kevin Roberts
  3. Partisan impacts on the economy: evidence from prediction markets and close elections By Erik Snowberg; Justin Wolfers; Eric Zitzewitz
  4. Policy Platforms, Campaign Spending and Voter Participation By Helios Herrera; David K Levine; Cesar Martinelli
  5. The Persistence of Underdevelopment: Institutions, Human Capital, or Constituencies? By Raghuram G. Rajan; Luigi Zingales
  6. Scandal, Protection, and Recovery in Political Cabinets By David P. Myatt; Torun Dewan
  7. Conflict, Popular Support and Asymmetric Fighting Technologies By Tomas Gonzalez
  8. Relief for the Environment? The Importance of an Increasingly Unimportant Industrial Sector By Martin Gassebner; Noel Gaston; Michael Lamla
  9. Do People Vote with Their Feet? An Empirical Test of Environmental Gentrification By Banzhaf, H. Spencer; Walsh, Randy
  10. Decentralization, Corruption And Government Accountability: An Overview By Dilip Mookherjee; Pranab Bardhan
  11. Heterogeneous Social Preferences and the Dynamics of Free Riding in Public Goods By Urs Fischbacher; Simon Gächter

  1. By: Ángel Solano García (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The main goal of this paper is to analyze the political outcome in countries where the relevant issue in elections is the control of immigration. In particular we explore the consequences on the political outcome of the fact that parties are either ideological or opportunistic with respect to this issue. In order to do that we use a simple two-party political competition model in which the issues over which parties take positions are the level of border enforcement and the way it has to be financed. We show that an ideological rather than a pure opportunistic behavior gives parties an advantage to win the election. This result may help us to understand the recent success of anti-immigrant and rightist parties in several countries.
    Keywords: Illegal immigration, ideological parties, unskilled and skilled.
    JEL: J61 F22 D72
    Date: 2006–03–08
  2. By: Kevin Roberts
    Abstract: An intertemporal voting model is examined where, at each date, there is a pairwise majority vote between the existing chosen state and some other state, chosen randomly. Intertemporal voting simplifies the strategic issues and the agenda setting is as unrestricted as possible. The possibility of cycles is examined, both in the intertemporal extension to the Condorcet paradox and in more general examples. The set of possibilities is rich, as is demonstrated by an exhaustive study of a three person, three state world. Equilibrium in pure strategies may fail to exist but a weakening of the equilibrium concept to admit probabilistic voting allows a general existence result to be proved. The analysis leads to the development of a dominant state which extends the notion of a Condorcet winner.
    Keywords: Condorcet Paradox, Condorcet Winner, Majority Voting, Intertemporal Voting, Strategic Voting
    JEL: C73 D72 D78
    Date: 2005
  3. By: Erik Snowberg; Justin Wolfers; Eric Zitzewitz
    Abstract: Political economists interested in discerning the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day. Analyzing high frequency financial fluctuations on November 2 and 3 in 2004, we find that markets anticipated higher equity prices, interest rates, and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican president raises equity valuations by 2-3 percent, and that since Reagan, Republican presidents have tended to raise bond yields.
    Keywords: Federal government ; Political science ; Economic policy
    Date: 2006
  4. By: Helios Herrera; David K Levine; Cesar Martinelli
    Date: 2005–10–20
  5. By: Raghuram G. Rajan; Luigi Zingales
    Abstract: Why is underdevelopment so persistent? One explanation is that poor countries do not have institutions that can support growth. Because institutions (both good and bad) are persistent, underdevelopment is persistent. An alternative view is that underdevelopment comes from poor education. Neither explanation is fully satisfactory, the first because it does not explain why poor economic institutions persist even in fairly democratic but poor societies, and the second because it does not explain why poor education is so persistent. This paper tries to reconcile these two views by arguing that the underlying cause of underdevelopment is the initial distribution of factor endowments. Under certain circumstances, this leads to self-interested constituencies that, in equilibrium, perpetuate the status quo. In other words, poor education policy might well be the proximate cause of underdevelopment, but the deeper (and more long lasting cause) are the initial conditions (like the initial distribution of education) that determine political constituencies, their power, and their incentives. Though the initial conditions may well be a legacy of the colonial past, and may well create a perverse political equilibrium of stagnation, persistence does not require the presence of coercive political institutions. We present some suggestive empirical evidence. On the one hand, such an analysis offers hope that the destiny of societies is not preordained by the institutions they inherited through historical accident. On the other hand, it suggests we need to understand better how to alter factor endowments when societies may not have the internal will to do so.
    JEL: O1 O15 P5 I2 K0
    Date: 2006–03
  6. By: David P. Myatt; Torun Dewan
    Abstract: Empirical evidence suggests that a Prime Minister can benefit from firing ministers who are involved in political scandals. We explore a model in which a minister`s exposure to scandals is positvely related to his policy activism, so that a Prime Minister may wish to protect him from resignation calls. We find that protection can sometimes work against the objective of encouraging activism: it makes a minister`s position more valuable to him and hence can encourage him to "sit tight" by moderating his activities. On the other hand, an exogenous increase in exposure to scandals may lead a minister to "live for today" by pursuing controversial policy innovations. The Prime Minister`s ability to protect ministers from resignation calls is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the wider membership of her cabinet; we show that heterogeneity of cabinet membership can play an important role.
    Keywords: Ministerial Resignations, Reputation, Relational Contracts, Multi-Market Contract, Protection, Incentives
    JEL: C70 D20 H10
    Date: 2005
  7. By: Tomas Gonzalez (School of Economics, Mathematics & Statistics, Birkbeck College)
    Abstract: This paper presents a model of conflict that combines popular support and asymmetric fighting technologies in a civil war setting. Starting with different endowments, two parties must decide on the amount of resources to divert from production to fighting. The conditions for conflict to arise are derived and civil war is shown to be subject to efficiency and distributive costs. Two other equilibria can occur, the first involving only one side choosing to arm, and the other a peace equilibrium where both groups choose zero fighting effort. The model is consistent with various historical accounts of the different roads to war and with recent empirical evidence on the determinants of conflict. Although the model focuses on civil wars, it can easily be extended to other situations that involve conflict such as rent seeking, political campaigning or litigation.
    JEL: D72 D74
    Date: 2006–03
  8. By: Martin Gassebner (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Noel Gaston (School of Business, Bond University, Gold Coast, Queensland, Australia); Michael Lamla (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland)
    Abstract: Deindustrialisation, stagnant real incomes of production workers and increasing inequality are latter-day features of many economies. It’s common to assume that such developments pressure policy-makers to relax environmental standards. However, when heavily polluting industries become less important economically, their political importance also tends to diminish. Consequently, a regulator may increase the stringency of environmental policies. Like some other studies, we find that declining industrial employment translates into stricter environmental standards. In contrast to previous studies, but consistent with our argument, we find that greater income inequality is associated with policies that promote a cleaner environment.
    Keywords: Environmental regulations; deindustrialisation; income inequality; extreme bounds analysis.
    JEL: Q58 P16 J31 C23
    Date: 2006–03
  9. By: Banzhaf, H. Spencer (Resources for the Future); Walsh, Randy
    Abstract: Tiebout’s (1956) suggestion that people “vote with their feet” to find the community that provides their optimal bundle of taxes and public goods has played a central role in the theory of local public finance over the past 50 years. Given the central importance of Tiebout’s insights, there have been surprisingly few direct tests of his premise. In this paper, we use a Tiebout equilibrium model to derive testable hypotheses about changes in local community demographics. The model clearly predicts increased population density in neighborhoods that experience an exogenous increase in public goods but yields only tentative predictions about the effect on neighborhood composition. To test these hypotheses, we use a difference-in-difference model to identify the effect of initial pollution levels and changes in local pollution on population and demographic composition. Our results provide strong empirical support for the notion that households “vote with their feet” in response to changes in environmental quality. This result has two implications. First, and most broadly, it provides direct empirical support for the assumptions underlying the Tiebout model. Second, in our particular application, the potential for what we call “environmental gentrification” has important implications both for the analysis of environmental equity and for the design of environmental policies aimed at benefiting the less-advantaged elements of society.
    Keywords: Tiebout, gentrification, air quality
    JEL: J6 Q5 R2
    Date: 2006–03–08
  10. By: Dilip Mookherjee (Department of Economics, Boston University); Pranab Bardhan
    Abstract: In summary, the effects of decentralization on corruption and government accountability are complex and cannot be summarized by simple, unconditional statements. This applies equally to theoretical analyses, cross-country regression results and more detailed empirical studies of specific countries. In this essay we reviewed the literature dealing with two principal accountability mechanisms: external competition with other governments, and internal democratic pressures.
    Date: 2005–06
  11. By: Urs Fischbacher (University of Zurich); Simon Gächter (University of Nottingham, CESifo and IZA Bonn)
    Abstract: We provide a direct test of the role of social preferences in voluntary cooperation. We elicit individuals' cooperation preference in one experiment and make a point prediction about the contribution to a repeated public good. This allows for a novel test as to whether there are "types" of players who behave consistently with their elicited preferences. We find clear-cut evidence for the existence of "types". People who express free rider preferences show the most systematic deviation from the predicted contributions, because they contribute in the first half of the experiment. We also show that the interaction of heterogeneous types explains a large part of the dynamics of free riding.
    Keywords: public goods games, experiments, voluntary contributions, conditional cooperation, free riding
    JEL: C91 C72 H41 D64
    Date: 2006–03

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