nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒05‒27
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Does Opportunism Pay Off? A Study of Vote Functions and Policy Preferences By Stefan Krause; Fabio Mendez
  2. How Do Unionists Vote? Estimating the Causal Impact of Union Membership on Voting Behaviour from 1966 to 2004 By Andrew Leigh
  3. The political economy of European federalism By Jean Michel Josselin (CREM - CNRS); Alain Marciano (University of Reims – CNRS – EconomiX – IDEP)
  4. Preferences, Poverty and Politics: Experimental and Survey Data from Vietnam By Tomomi Tanaka; Colin F. Camerer; Quang Nguyen
  5. The Political Economy of Flexicurity Author- Tito Boeri By J. Ignacio Conde-Ruiz; Vincenzo Galasso
  6. Mass Attidudes Toward Financial Crisis and Economic Reform in Korea By Bernd Hayo
  7. Explaining de facto Judicial Independence By Bernd Hayo and Stefan Voigt
  8. Optimal Government Regulations and Red Tape in an Economy with Corruption By Fabio Mendez; Facundo Sepulveda
  9. The Effect of Rewards and Sanctions in Provision of Public Goods By Martin Sefton; Robert S. Shupp; James Walker
  10. Social Cohesion By Lindqvist, Erik; Östling, Robert

  1. By: Stefan Krause; Fabio Mendez
    Abstract: We present an empirical study of voting behavior to analyze the impact of opportunism; that is, whenever political incumbents implement economic policies strategically and in connection with general elections in order to gain votes. We derive a measure for opportunism that is isolated from the impact of aggregate economic conditions, such as the levels of economic growth and consumer price inflation. In contrast with most papers available on these issues, we do not ask whether political parties behave opportunistically; instead, we ask whether they receive a direct, electoral punishment or incentive for doing so. Our results indicate that the electorate punishes an incumbent party for behaving opportunistically, controlling for economic conditions and political variables. The party in power receives a significantly lower percentage of votes whenever it follows expansionary policies during the election year, relative to the other years of its tenure.
    Date: 2006–05
  2. By: Andrew Leigh (SPEAR Centre, RSSS, ANU)
    Abstract: I explore the voting patterns of trade union members in Australian elections conducted between 1966 and 2004, and find that on average, 63 percent of trade union members vote for the Australian Labor Party. Despite the fact that union membership declined from around one-half of the workforce in the early-1980s to one-quarter of the workforce in the early-2000s, unionists have not become more pro-Labor. Analysing unionists’ voting behaviour by gender, I find that male unionists were more pro-Labor than female unionists in the 1960s, but the reverse is true today. Recognising that union membership may be endogenous with respect to political ideology, I instrument for union membership and conclude that the observed association between union membership and voting reflects a causal relationship.
    Keywords: voting, elections, unions, endogeneity, instrumental variables
    JEL: D72 J51
    Date: 2006–03
  3. By: Jean Michel Josselin (CREM - CNRS); Alain Marciano (University of Reims – CNRS – EconomiX – IDEP)
    Abstract: In spite of the clear objective assigned to the integration process in the 1950s, the institutional status of the European Union remains ambiguous and uneasy to define. The argument that we present in this article is that Europe has always hesitated between two forms of federalism. We use an agency framework and demonstrate that before the landmark cases Van Gend en Loos and Costa v. E.N.E.L., the European Union is mainly a confederation but it already contains elements of a federation. Afterwards, the institutional structure of the Union evolves towards a more centralised federalism but still shows lasting elements of a confederation.
    Keywords: Federation, confederation, political economy, European Union.
    JEL: D72 H11 K10 N41
    Date: 2006
  4. By: Tomomi Tanaka; Colin F. Camerer; Quang Nguyen
    Date: 2006–05–14
  5. By: J. Ignacio Conde-Ruiz; Vincenzo Galasso
    Abstract: We document the presence of a trade-off between unemployment benefits (UB) and employment protection legislation (EPL) in the provision of insurance against labor market risk. Different countries' locations along this trade-off represent stable, hard to modify, politico-economic equilibria. We develop a model in which individuals determine the strictness of EPL and the size of a redistributive UB system in two distinct political environments. Agents are heterogeneous along two dimensions: employment status -insiders and outsiders - and skills - low and high. Unlike previous work on EPL, we model employment protection as an institution redistributing also among insiders, notably in favour of the low-skill workers. A key implication of the model is that flexicurity configurations with low EPL and high UB should emerge in presence of dispersed wage structures and progressive UB systems. Micro data on wage dispersion display correlations consistent with our results. The analysis of the experience of EPL reformers yields results which are in line with the relation between EPL and progressiveness of the UB system implied by our model.
  6. By: Bernd Hayo (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)
    Abstract: This paper gives an account of the financial crisis that took place in Korea from the point of view of the Korean population using survey data collected in 1998 and 1999. Although both, internal and external factors were blamed as causes, domestic factors were considered to be of greater importance. After identifying respondents as supporting either market-based or statebased reform strategies using factor analysis, various determinants of these alternative views are being analyzed within the framework of regression models. A particularly interesting result is that, contrary to theoretical assumptions and empirical evidence on other regions, it is political ideology and not individual economic determinants that helps to explain the respondents’ attitudes towards reform strategies in Korea.
    Keywords: South Korea, financial crisis, public opinion, economic reform strategies institution
    JEL: O5 F3
    Date: 2005
  7. By: Bernd Hayo and Stefan Voigt (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)
    Abstract: A high degree of de facto judicial Independence (JI) functions as a crucial precondition of governments to credibly commit to legislative decisions, such as respecting private property rights. Thus, de facto JI should improve the allocative efficiency and may therefore contribute positively to economic growth. But JI as formally written down in legal texts is an imperfect predictor for de facto JI. This paper tries to identify the forces which determine de facto JI. A distinction between factors that can be influenced in the short run and those that are the result of historical development and that are exempt from short-term modification is made. Ascertaining the relative relevance of these two groups of variables promises to be policy-relevant. A rigorous empirical model reduction process is used in order to cope with the potential excess of explanatory variables. The explanatory variables for de facto JI that survive the reduction process are de jure JI, legal confidence of the public, extent of democratization, degree of press freedom, and the religious beliefs of the population.
    Keywords: Judicial independence, informal institutions, formal institutions
    JEL: D D H K
    Date: 2005
  8. By: Fabio Mendez; Facundo Sepulveda
    Abstract: We study an economy where agents are heterogeneous in entrepreneurial ability, and may decide to become workers or entrepreneurs. The government is motivated by a production externality to impose regulations on entrepreneurship, and sets a level of red tape -administered by public officials-to test regulation compliance. In an environment where some officials are corrupt, we study what are the optimal levels of regulations and red tape, and to what extent such policies reduce the welfare losses created by corruption. For each level of externalities, we find that high and low levels of corruption create qualitatively different distortions, which in turn changes the nature and reach of optimal policies. Under low levels of corruption and externalities, the government sets low levels of regulations and minimal red tape, and with these policies achieves the first best allocation. When externalities and corruption are above a threshold, only a second best allocation can be achieved. Moreover, when externalities are large, mandating higher levels of red tape is a Pareto improving policy.
    Keywords: Corruption, optimal policy, red tape, regulations.
    JEL: D73 D60 D63 H21
    Date: 2006–03
  9. By: Martin Sefton (University of Nottingham, United Kingdom); Robert S. Shupp (Department of Economics, Ball State University); James Walker (Department of Economics, Indiana University, Bloomington, IN)
    Abstract: A growing number of field and experimental studies in social dilemma settings focus on the institutional arrangements by which individuals are able to solve collective action problems. Important in this research is the role of reciprocity and institutions that facilitate cooperation via opportunities for monitoring, sanctioning, and rewarding others. This study contrasts sanction and reward institutions in the context of a public goods experiment. Sanctions represent a net loss, a cost to both the participant imposing the sanction and the individual receiving the sanction. Rewards represent a zero sum transfer from participants giving rewards to those receiving rewards. These institutions are compared in regard to their impact on overall levels of cooperation and economic efficiency.
    JEL: C92
    Date: 2005–02
  10. By: Lindqvist, Erik (Dept. of Economics, Stockholm School of Economics); Östling, Robert (Dept. of Economics, Stockholm School of Economics)
    Abstract: Although several economic theories predict that heterogeneity in preferences affects economic outcomes, there are few attempts to directly study this relationship. We measure the degree of social cohesion in a society by the standard deviation in responses to multiple-choice questions in the World Values Survey. Using cross-country data, we find that social cohesion is lower in countries that are poor, ethnically fragmented, situated close to the equator and where the level of trust is low. We also find social cohesion to have predictive power for the measures of government quality used by La Porta et al (1999), in particular infant mortality, and for income inequality. This paper does not try to decide whether these relationships are causal, but the results suggest that social cohesion may be a measurable and robust determinant of economic outcomes.
    Keywords: social cohesion; preference heterogeneity; trust; ethnic fractionalization
    JEL: H11 H20 H42 Z13
    Date: 2006–05–19

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