nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒05‒20
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Electoral Poaching and Party Identification. By Kovenock, Dan; Robertson, Brian
  2. Democratic Voting and Social Exclusion By Sylvain Dessy; Flaubert Mbiekop
  3. Political Instability and Inflation Volatility By Ari Aisen; Francisco José Veiga
  4. Markets Versus Governments: Political Economy of Mechanisms By Daron Acemoglu; Michael Golosov; Aleh Tsyvinski
  5. Why There is a Democratic Deficit in the EU: A Response to Majone and Moravcsik By Follesdal, Andreas; Hix, Simon
  6. Popular Democracy and the European Union Polity By Mair, Peter
  7. Majority voting with stochastic preferences: The whims of a committee are smaller than the whims of its members By Pierre-Guillaume Méon
  8. Individual Attitudes towards Immigrants: Welfare-State Determinants Across Countries By Giovanni Facchini; Anna Maria Mayda
  9. Human capital and corruption: a microeconomic model of the bribes market with democratic contestability By Pedro Cosme Costa Vieira; Aurora A.C. Teixeira
  10. Institutional quality and trade: which institutions? which trade? By Pierre-Guillaume Méon; Khalid Sekkat
  11. On the voting power of an alliance and the subsequent power of its members By M.R. Feix (SUBATECH/EMN); D. Lepelley (CERESUR); V. Merlin (CREM – CNRS); J.L. Rouet (MAPMO – CNRS)

  1. By: Kovenock, Dan; Robertson, Brian
    Abstract: This paper studies electoral competition in a model of redistributive politics with deterministic voting and heterogeneous voter loyalties to political parties. We construct a natural measure of “party strength” based on the sizes and intensities of a party’s loyal voter segments and demonstrate how party behavior varies with the two parties’ strengths. In equilibrium, parties target or “poach” a strict subset of the opposition party’s loyal voters: offering those voters a high expected transfer, while “freezing out” the remainder with a zero transfer. The size of the subset of opposition voters frozen out and consequently, the level of inequality in utilities generated by a party’s equilibrium redistribution schedule is increasing in the opposition party’s strength. We also construct a measure of “political polarization” that is increasing in the sum and symmetry of the parties’ strengths, and find that the expected ex-post inequality in utilities of the implemented policy is increasing in the political polarization.
    Date: 2005–10
  2. By: Sylvain Dessy; Flaubert Mbiekop
    Abstract: This paper explores the political determinants of societies' tolerance for social exclusion on the basis of ethnicity, religion, or race. We develop a political-economic model of social exclusion with three main features. First, each individual living in this society must submit a political proposals regarding the extent to which society must tolerance social exclusion. Second, depending on the realized degree of society's tolerance for social exclusion, each population group comprising the society must decide on how much resources to expend in order to exclude rival groups from, or include its members in, the public allocation of education resources. Third, allocation of resources to participation in the exclusion contest trades off private investment in child's human capital. To the extent that population size is, at least initially, the only source of asymmetry between rival groups, our analysis suggests that the introduction of democratic voting may not be sufficient to save small, but visible, minorities from social exclusion. Only where this asymmetric is moderate, can the introduction of democratic voting suffice to eliminate social exclusion.
    Keywords: Democratic voting, social exclusion, political equilibrium
    JEL: D72 J15 P16
    Date: 2006
  3. By: Ari Aisen (International Monetary Fund); Francisco José Veiga (Universidade do Minho - NIPE)
    Abstract: The purpose of this paper is to empirically determine the causes of the worldwide diversity of inflation volatility. We show that higher degrees of political instability, ideological polarization and political fragmentation are associated with higher inflation volatility.
    Keywords: Inflation, volatility, political instability, institutions.
    JEL: E31 E63
    Date: 2006
  4. By: Daron Acemoglu; Michael Golosov; Aleh Tsyvinski
    Abstract: We study the optimal Mirrlees taxation problem in a dynamic economy with idiosyncratic (productivity or preference) shocks. In contrast to the standard approach, which implicitly assumes that the mechanism is operated by a benevolent planner with full commitment power, we assume that any centralized mechanism can only be operated by a self-interested ruler/government without commitment power, who can therefore misuse the resources and the information it collects. An important result of our analysis is that there will be truthful revelation along the equilibrium path (for all positive discount factors), which shows that truth-telling mechanisms can be used despite the commitment problems and the different interests of the government. Using this tool, we show that if the government is as patient as the agents, the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear. In contrast, when the government is less patient than the citizens, there are positive aggregate distortions and positive aggregate capital taxes even asymptotically. Under some additional assumptions on preferences, these results generalize to the case when the government is benevolent but unable to commit to future tax policies. We conclude by providing a brief comparison of centralized mechanisms operated by self-interested rulers to anonymous markets.
    JEL: H11 H21 E61 P16
    Date: 2006–05
  5. By: Follesdal, Andreas; Hix, Simon
    Abstract: In a series of recent papers, Giandomenico Majone and Andrew Moravcsik have ‘raised the bar’ in the debate over the so-called ‘democratic deficit’ in the European Union. These two influential scholars both contend that much of the existing analysis is flawed and that the EU is as democratic as it could, and even should, be. We accept many of Moravcsik’s and Majone’s arguments. However, we disagree about one key element: that a democratic polity requires contestation for political leadership and argument over the direction of the policy agenda. This aspect, which is ultimately the difference between a democracy and an enlightened form of authoritarianism, is an essential element of even the ‘thinnest’ theories of democracy, yet is conspicuously weak in the EU.
    Keywords: democracy; European elections; legitimacy; non-majoritarian institutions; normative political theory; political parties; public opinion; Constitution for Europe; agenda-setting
    Date: 2005–03–14
  6. By: Mair, Peter
    Abstract: Although we still celebrate the late twentieth-century ‘victory of democracy’, our understanding of what democracy entails in both theory and practice is increasingly subject to a variety of qualifying definitions, many of which now seem to devalue the role of elections and electoral accountability. This is also obviously seen in the politics of the European Union, where the efforts to displace conflict dimensions into arenas where democratic authority is lacking, as well as the efforts to depoliticize issues that relate to European integration, have led to the development of a distinct political system in which the exercise of popular control and electoral accountability proves very difficult. At the same time, the EU should not be seen as exceptional in this regard, but should instead be seen as symptomatic of a wider process of depoliticization. As the experience of the EU suggests, the combination of popular democracy and legitimacy is proving increasingly problematic – not only in Europe, but also further afield.
    Keywords: constitutional change; democracy; Europeanization; governance; legitimacy; non-majoritarian institutions; political parties; political representation; polity building
    Date: 2005–05–18
  7. By: Pierre-Guillaume Méon (DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: This note studies the volatility of the policy chosen by a committee whose members’ preferences are volatile, due to common and individual preferences shocks. It is shown that majority voting mitigates the latter but not the former. The volatility of the policy is smaller the smaller the volatility of members’ preferences, smaller the larger the size of the committee, and smaller than if it was chosen by a single member. The results hold in a context of uncertainty and with multidimensional issues.
    Keywords: committee, majority voting, uncertainty, volatility
    JEL: D71
    Date: 2006–04
  8. By: Giovanni Facchini; Anna Maria Mayda (Department of Economics, Georgetown University)
    Abstract: This paper analyzes welfare-state determinants of individual attitudes towards immigrants - within and across countries - and their interaction with labor-market drivers of preferences. We consider two different mechanisms through which a redistributive welfare system might adjust as a result of immigration. Under the first scenario, immigration has a larger impact on individuals at the top of the income distribution, while under the second one it is low-income individuals who are most affected through this channel. Individual attitudes are consistent with the first welfare-state scenario and with labor-market determinants of immigration attitudes. In countries where natives are on average more skilled than immigrants, individual income is negatively correlated with pro-immigration preferences, while individual skill is positively correlated with them. These relationships have the opposite signs in economies characterized by skilled migration (relative to the native population). Such results are confirmed when we exploit international di®erences in the characteristics of destination countries' wel-fare state. Classification-JEL Codes: F22, F1, J61
    Keywords: Immigration Attitudes, Welfare State, Political Economy.
  9. By: Pedro Cosme Costa Vieira (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEMPRE, Faculdade de Economia, Universidade do Porto)
    Abstract: To overcome market failures society creates common laws that stimulate or penalize individual actions, the enforcement of which depends on the actions of public authorities who may be susceptible to corruption. Thus, a new market emerges where ‘influences’ are traded. Legislators have incentives to deviate from the goal of efficiency and produce laws that maximize the gains that can be expected from bribes. We model this behaviour for an autocracy versus a democracy, using a microeconomic framework. We assume that in an autocracy rulers have a monopoly over the bribes market, whereas in a democracy conflicting groups compete in the bribes market. In order to bring about the downfall of the incumbent rulers, these groups inform voters of the rulers' deviant actions so that, by a stochastic process, they convince voters of the existence of bribes and therefore gain their votes. The models constructed produce results that are compatible with the well-known stylized facts, namely that (1) in a democracy the level of corruption is lower than in an autocracy, although still positive, that (2) in environments where the level of human capital is higher (the proxy for the voters’ receptivity to the efforts of the opposition), regimes are closer to democracies and the level of corruption is lower, and that (3) the level of corruption is higher in more regulated economies.
    Keywords: Human capital; corruption; democracy; computational models
    JEL: J24 D73 C63
    Date: 2006–05
  10. By: Pierre-Guillaume Méon (DULBEA, Université libre de Bruxelles, Brussels); Khalid Sekkat (DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: Using a panel of countries over 1920-2000, this paper examines the extent to which different dimensions of the institutional framework affect exports of total, manufactured, and non-manufactured goods. It is observed that exports of manufactured goods are positively affected by the control of corruption, the rule of law, government effectiveness, and the lack of political violence. This result does not hold for non-manufactured and total exports. Instrumental variable regressions finally confirm that the control of corruption, but not the other dimensions of governance, robustly cause manufactured exports.
    Keywords: Institutions, governance, trade, manufactured exports, non-manufactured exports.
    JEL: F15 O17
    Date: 2006–04
  11. By: M.R. Feix (SUBATECH/EMN); D. Lepelley (CERESUR); V. Merlin (CREM – CNRS); J.L. Rouet (MAPMO – CNRS)
    Abstract: Even, and in fact chiefly, if two or more players in a voting game have on a binary issue independent opinions, they may have interest to form a single voting alliance giving an average gain of influence for all of them. Here, assuming the usual independence of votes, we first study the alliance voting power and obtain new results in the so-called asymptotic limit for which the number of players is large enough and the alliance weight remains a small fraction of the total of the weights. Then, we propose to replace the voting game inside the alliance by a random game which allows new possibilities. The validity of the asymptotic limit and the possibility of new alliances are examined by considering the decision process in the Council of Ministers of the European Union.

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