nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒05‒13
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Pork Barrel Cycles By Allan Drazen; Marcela Eslava
  2. The Stability and Growth Pact: A European Answer to the Political Budget Cycle? By Thierry Warin; Kenneth Donahue
  3. Daughters and Left-Wing Voting By Andrew J. Oswald; Nattavudh Powdthavee
  4. Factionalism in Political Parties: An Analytical Framework for Comparative Studies By Patrick Köllner; Matthias Basedau
  5. Political Ideology and Economic Freedom. By Bjørnskov, Christian
  6. Representing Different Constituencies: Electoral Rules in Bicameral Systems in Latin America and Their Impact on Political Representation By Detlef Nolte; Francisco Sánchez
  7. Estimating the Effect of Elite Communications on Public Opinion Using Instrumental Variables By Matthew Gabel; Kenneth Scheve
  8. Vicious and Virtuous Circles: The Political Economy of Unemployment By Ruthira Naraidoo; Patrick Minford
  9. A Paradox of Plenty? Rent Distribution and Political Stability in Oil States By Matthias Basedau; Wolfram Lacher
  10. Do Politicians Free-ride? - an empirical test of the common pool model By Tyrefors, Björn
  11. Buy, Lobby or Sue: Interest Groups' Participation in Policy Making - A Selective Survey By Pablo T. Spiller; Sanny Liao

  1. By: Allan Drazen; Marcela Eslava
    Abstract: We present a model of political budget cycles in which incumbents influence voters by targeting government spending to specific groups of voters at the expense of other voters or other expenditures. Each voter faces a signal extraction problem: being targeted with expenditure before the election may reflect opportunistic manipulation, but may also reflect a sincere preference of the incumbent for the types of spending that voter prefers. We show the existence of a political equilibrium in which rational voters support an incumbent who targets them with spending before the election even though they know it may be electorally motivated. In equilibrium voters in the more "swing" regions are targeted at the expense of types of spending not favored by these voters. This will be true even if they know they live in swing regions. However, the responsiveness of these voters to electoral manipulation depends on whether they face some degree of uncertainty about the electoral importance of the group they are in. Use of targeted spending also implies voters can be influenced without election-year deficits, consistent with recent findings for established democracies.
    JEL: D72 E62 D78
    Date: 2006–05
  2. By: Thierry Warin; Kenneth Donahue
    Abstract: The existing literature on political budget cycles looks at the temptation for incumbent governments to run a greater deficit before an election by considering the characteristics of the incumbent. We propose here to look at the signals the incumbent receives from the voters. For this purpose, we consider the votes from the previous national elections and see whether they may influence the incumbent government to run a sound fiscal policy or an expansionary fiscal policy. However, since 1993 Europe has been equipped with two fiscal rules: a deficit and a debt ceiling. In this context, can we find evidence of a “political budget cycle” before 1993, and did the fiscal rules prevent the existence of a “political budget cycle” afterwards? To address these questions, we use a cross-sectional time series analysis of European countries from 1979 to 2005.
    Keywords: Stability and Growth Pact, Political Business Cycle, Political budget Cycle, Partisan Theory
    JEL: E6 F4 P43
    Date: 2006–06
  3. By: Andrew J. Oswald (University of Warwick and IZA Bonn); Nattavudh Powdthavee (University of London)
    Abstract: This paper provides evidence that daughters make people more left-wing. Having sons, by contrast, makes them more right-wing. Parents, politicians and voters are probably not aware of this phenomenon - nor are social scientists. The paper discusses its economic and evolutionary roots. It also speculates on where research might lead. The paper ends with a conjecture: left-wing individuals are people who come from families into which, over recent past generations, many females have been born.
    Keywords: voting, gender, daughters, political preferences, attitudes
    JEL: D1 D72 H1 J7
    Date: 2006–04
  4. By: Patrick Köllner (GIGA Institute of Asian Affairs); Matthias Basedau (GIGA Institute of African Affairs)
    Abstract: Factionalism can affect the stability and institutionalization of parties and party systems and it can impact on the efficiency and legitimacy of political parties and political systems as a whole. Nevertheless, factionalism has only received scant attention in the comparative literature on political parties. As this paper shows, there is no dearth of conceptual approaches and hypotheses which can readily be used to advance the systematic analysis of factionalism. We survey the relevant literature and offer a comprehensive analytical framework to stimulate comparatively oriented and nuanced studies of the causes, characteristics and consequences of intra-party groups.
    Keywords: political parties, factionalism, party organization, electoral systems, party finance
    Date: 2005–12
  5. By: Bjørnskov, Christian (Department of Economics, Aarhus School of Business)
    Abstract: This paper examines the association between political ideology and the size of government and quality of the legal system and regulations. A cross-country indicator of government and citizen ideology is presented. Empirical results suggest that ideologically leftwing governments increase the size of government while the long-term ideological convictions of citizens affect the size of government and the quality of the legal system and regulations. These effects depend on the degree of political competition while ideology also affects countries’ institutional response to economic crisis.
    Keywords: Political Economy; Institutional Quality; Ideology; Social Norms
    JEL: P16 Z13
    Date: 2005–01–01
  6. By: Detlef Nolte (GIGA Institute for Ibero-American Studies); Francisco Sánchez (Instituto Interuniversitario de Iberoamérica y Portugal, University of Salamanca)
    Abstract: This article analyzes the quantitative (mechanical) effects and qualitative (perceptions) effects on political representation of the election of two separate chambers in Latin America’s bicameral systems. After discussing the spread and strength of bicameralism in Latin America, we compare the different electoral systems for lower chambers and Senates. Our study shows that in a region characterized by relatively high levels of malapportionment in the first chamber, the second chamber reinforces the malapportionment in parliament. Representation tends to be much more disproportional in the upper chamber than in the lower house. Moreover, the differences in the electoral systems and district magnitudes for both chambers make it more difficult for women to win a seat in the Senate.
    Keywords: Latin America, Senates, bicameralism, electoral systems, malapportionment, gender quota
    Date: 2005–11
  7. By: Matthew Gabel (Department of Political Science, University of Kentucky); Kenneth Scheve
    Abstract: A central question in the study of democratic polities is the extent to which elite opinion about public policy shapes and potentially manipulates public opinion on those issues. Existing empirical estimates of the effect of elite communication on individual opinion formation are, however, characterized by a number of serious methodological problems, and consequently, there is little in the way of compelling evidence that elites actually influence individual opinions. This paper proposes an identification strategy for estimating the causal effect of elite messages on public support for European integration employing instrumental variable estimation. The paper presents three main empirical results. First, we find that more negative elite messages about European integration do indeed decrease public support for Europe. Our analysis suggests that OLS estimates that ignore the endogeneity, omitted variables, and measurement problems that typically occur in estimating the effects of elite communication are biased, underestimating the magnitude of the effect of elite messages by fifty percent. Second, we find no evidence that this effect of elite messages varies for more politically aware individuals. Third, our estimates are inconsistent with a mainstreaming effect in which political awareness increases support for Europe in those political settings in which elites have a favorable consensus on the benefits of integration. This result is in sharp contrast to the OLS analysis that incorrectly suggests a mainstreaming effect.
    Date: 2005–08
  8. By: Ruthira Naraidoo (Keele University, Centre for Economic Research and School of Economic and Management Studies); Patrick Minford (Cardiff Business School, Aberconway Building, Cardiff University)
    Abstract: We develop a theoretical nonlinear model of equilibrium unemployment and test its policy implications for a number of OECD countries. The theory here sees the natural rate and the associated equilibrium path of unemployment as endogenous, pushed by the interaction of shocks and the institutional structure of the economy; the channel through which these two forces feed on each other is a political economy process whereby voters with limited information on the natural rate of unemployment react to shocks by demanding more or less social protection. The reduced form results from a dozen OECD economies give support to the model and further evidence is obtained by structural estimates for the UK.
    Keywords: Equilibrium unemployment, political economy, vicious and virtuous circles, bootstrapping
    JEL: C15 C22 E24
    Date: 2006–03
  9. By: Matthias Basedau (GIGA Institute of African Affairs); Wolfram Lacher (School of Oriental and African Studies, University of London)
    Abstract: Resource curse theory claims that resource abundance encourages violent conflict. A study of 37 oil-producing developing countries, however, reveals that oil states with very high levels of oil revenue are remarkably stable. An analysis of the ways in which governments spend oil revenues identifies two distinct types of rentier systems – the large-scale distributive state and the patronage-based system – which are strongly linked to instability or its absence. However, some deviant cases, such as Equatorial Guinea and Gabon, illustrate the need for further research. Apparently, the notion of a “paradox of plenty” has neglected rentier mechanisms that avoid conflict.
    Keywords: Resource Curse, Paradox of Plenty, Oil, Rentier State, Violent Conflict, Political Stability, Developing World
    JEL: N5 N50 O13
    Date: 2006–04
  10. By: Tyrefors, Björn (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: This paper uses a compulsory amalgamation reform of municipalities in Sweden to test for geographical opportunistic political behavior. The reform has favorable characteristics from an econometrical and causal point of view, since it was based on observables. The reform gives the local government incentives to increase borrowing before the amalgamation takes place, since the cost will be shared by all tax payers in the amalgam. The strength of the incentive to free ride will be determined by the population size, relative to the population size of the amalgam. The law of amalgamation was decided upon in 1969 and postulated that all amalgamations should be finalized by the beginning of 1974. We test if relative population size affects budget deficits in the years after the decision of the reform, but before the amalgamation takes place. We find a significant and sizeable free riding effect. The result is robust to various specifications and tests and corresponds to a common pool type of behavior as in Weingast, Shepsle and Johnsen (1981).
    Keywords: common pool; selection on observables; amalgamations
    JEL: D72 E62 H72 H74
    Date: 2006–04–26
  11. By: Pablo T. Spiller; Sanny Liao
    Abstract: The participation of interest groups in public policy making is unavoidable. Its unavoidable nature is only matched by the universal suspicion with which it has been seen by both policy makers and the public. Recently, however, there has been a growing literature that examines the participation of interest groups in public policy making from a New Institutional Economics perspective. The distinguishing feature of the New Institutional Economics Approach is its emphasis in opening up the black box of decision-making, whether in understanding the rules of the game, or the play of the game. In this paper we do not attempt to fairly describe the vast literature on interest group's behavior. Instead, the purpose of this essay for the New Institutional Economics Guide Book is to review recent papers that follow the NIE mantra. That is, they attempt to explicate the micro-analytic features of the way interest groups actually interact with policy-makers, rather than providing an abstract high-level representation. We emphasize the role of the institutional environment in understanding interest groups' strategies.
    JEL: H K L
    Date: 2006–05

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