nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒07‒09
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Separation of Powers and the Budget Process By Gene M. Grossman; Elhanan Helpman
  2. On the measurement of political instability and its impact on economic growth By Jong-A-Pin, R.
  3. Protection for Sale with Imperfect Rent Capturing By Giovanni Facchini; Johannes Van Biesebroeck; Gerald Willmann
  4. Protests and Reputation By Buenrostro, Lucia; Dhillon, Amrita; Wooders, Myrna
  5. When is Democracy an Equilibrium?: Theory and Evidence from Colombia's La Violencia By Ragnar Torvik; James A. Robinson; Mario Chacón
  6. Decentralization and Political Institutions By Ruben Enikolopov; Ekaterina Zhuravskaya
  7. Artificial States By Alberto Alesina; William Easterly; Janina Matuszeski
  8. Media Freedom, Bureaucratic Incentives, and the Resource Curse By Georgy Egorov; Sergei Guriev; Konstantin Sonin
  9. European Parliament Electoral Turnout in Post-Communist Europe By Christine Fauvelle-Aymar; Mary Stegmaier
  10. Spending Preferences of Public Sector Officials. Survey Evidence from the Finnish Central Government By Takis Venetoklis; Jaakko Kiander
  11. Asylum Seekers in Europe: The Warm Glow of a Hot Potato By Giovanni Facchini; Oliver Lorz ( RWTH Aachen University); Gerald Willmann
  12. Enfranchisement, Intra-Elite Conflict and Bargaining By Ghosal, Sayantan; Proto, Eugenio

  1. By: Gene M. Grossman; Elhanan Helpman
    Abstract: We study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executive’s constituency is more narrow than that of the powerful legislators.
    JEL: H61 D78 H41
    Date: 2006–06
  2. By: Jong-A-Pin, R. (Groningen University)
    Abstract: We examine the relationship between political instability and economic growth. Using an exploratory factor analysis we identify four dimensions of political instability: (1) mass civil protest, (2) politically motivated aggression, (3) instability within the political regime and (4) instability of the political regime. We show that individual political instability indicators are generally poor proxies for the underlying dimensions of political instability. Our panel estimates for a sample of 98 countries in the period 1984-2003 indicate that the various dimensions of political instability have different effects on economic growth.
    Date: 2006
  3. By: Giovanni Facchini (University of Illinois and University of Milan); Johannes Van Biesebroeck (University of Toronto and NBER); Gerald Willmann (University of Kiel)
    Abstract: The Grossman and Helpman (1994) model explains tariffs as the outcome of a lobbying game between special interests and the government. Most empirical implementations of this framework use instead non-tariff barriers to measure the extent of protection. Importantly, while the former set of instruments allow the government to fully capture the rents from protection, the latter does not. As a result, structurally estimating the ‘protection for sale’ model using data on non-tariff barriers is likely to lead to biased parameter estimates. To address this problem, we augment Grossman and Helpman’s (1994) model by explicitly considering trade policy instruments allowing only partial capturing. Taking our specification to the data, we find that, on average, 72–75 percent of the rent is actually captured. Furthermore, we obtain more realistic, lower estimates of the implied share of the population involved in lobbying activities than in the previous literature, while the estimated weight of aggregate welfare in the objective function of the government is as high as in previous studies.
    Keywords: Protection for Sale, Non-tariff Barriers, Partial Rent Capturing
    JEL: F13
    Date: 2005
  4. By: Buenrostro, Lucia; Dhillon, Amrita (Department of Economics, University of Warwick); Wooders, Myrna
    Abstract: Protests take place for a variety of reasons. In this paper we focus on protests that have a well defined objective, that is in conflict with the objectives of the government. Hence the success or failure of a protest movement depends crucially on how the government responds. We assume that government types are private information so that governments have an interest in building a reputation to deter protestors. We extend the standard reputation framework to one where potential protesters in the domestic jurisdiction are competing in a common market with protestors of a foreign jurisdiction, resulting in a situation where domestic governments care about the decisions of foreign governments. We derive conditions under which an equilibrium with "contagion" in protests might exist : protests that start in one jurisdiction spread to others. Finally we use our results to interpret the Fuel tax protests in France and England that took place in 2000 as well as the three successive pro-democracy revolutions in Georgia, Ukraine and Kyrgyzstan in 2003-05.
    Date: 2006
  5. By: Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology, Norway); James A. Robinson (Department of Government, Harvard University); Mario Chacón (Yale University, Department of Political Scienc)
    Abstract: The conventional wisdom in political science is that for a democracy to be consolidated, all groups must have a chance to attain power. If they do not then they will subvert democracy and choose to fight for power. In this paper we show that this wisdom is, if not totally incorrect, seriously incomplete. This is so because although the probability of winning an election increases with the size of a group, so does the probability of winning a fight. Thus in a situation where all groups have a high chance of winning an election, they may also have a high chance of winning a fight. Indeed, in a natural model, we show that democracy may never be consolidated in such a situation. Rather, democracy may only be stable when one group is dominant. We provide a test of a key aspect of our model using data from La Violencia, a political conflict in Colombia during the years 1946-1950 between the Liberal and Conservative parties. Consistent with our results, and contrary to the conventional wisdom, we show that fighting between the parties was more intense in municipalities where the support of the parties was more evenly balanced.
    Date: 2006–04–16
  6. By: Ruben Enikolopov (Harvard University and CEFIR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR)
    Abstract: Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.
    Date: 2006–05
  7. By: Alberto Alesina; William Easterly; Janina Matuszeski
    Abstract: Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
    JEL: F43 F50
    Date: 2006–06
  8. By: Georgy Egorov (Harvard University); Sergei Guriev (New Economic School/CEFIR and CEPR); Konstantin Sonin (New Economic School/CEFIR and CEPR)
    Abstract: How can a non-democratic ruler provide proper incentives for state bureaucracy? In the absense of competitive elections and separation of powers, the ruler has to gather information either from a centralized agency such as a secret service or a decentralized source such as media. The danger of using a secret service is that it can collude with bureaucrats; overcoming collusion is costly. Free media aggregate information and thus constrain bureaucrats, but might also help citizens to coordinate on actions against the incumbent. We endogenize the ruler’s choice in a dynamic model to argue that free media are less likely to emerge in resource-rich economies where the ruler is less interested in providing incentives to his subordinates. We show that this prediction is consistent with both cross-section and panel data.
    Keywords: media freedom, non-democratic politics, bureaucracy, resource curse
    JEL: P16 D72 D80 Q4
    Date: 2006–02
  9. By: Christine Fauvelle-Aymar (LAEP - LAboratoire d'Economie Publique - [Université Panthéon-Sorbonne - Paris I]); Mary Stegmaier (University of Virgnia - Department of Economics - [University of Virginia])
    Abstract: The relatively low voter turnout rates in the June 2004 European Parliamentary elections in many of the post-communist states surprised observers. While the average turnout rate for these new-EU member states barely surpassed 30%, turnout exhibited much variance at the national and sub-national levels. In this article, we study the determinants of European Parliamentary election voter turnout rates in the post-communist countries at the regional level. Our central hypothesis is that regional turnout rates may be related to regional economic conditions and that in areas experiencing economic hardship, turnout will be lower. We also assess the extent that EU attitudes matter for turnout. A unique data set, compiled at the NUTS-3.
    Keywords: Economics of voting;participation;European Parliamentary election; post-communist countries.
    Date: 2006–07–05
  10. By: Takis Venetoklis; Jaakko Kiander
    Abstract: We examine the determinants that shape the spending preferences of public sector employees on several budgetary appropriations. Following Niskanen?s (1971, 1975, 1994) budget maximising theory, we test whether these employees prefer larger budgetary appropriations rather than less. We measure their preferences to increase their own bureau?s appropriations and compare those against their preferences for other bureaux?s appropriations. The empirical evidence is gathered via a mail survey targeting high level officials from different Ministries in Finland. The analysis of the responses suggests that Niskanen?s theory is supported, in part.
    Keywords: Bureaucratic behaviour, budgetary determinants, budgetary process
    JEL: H61 D73 H83
    Date: 2004–10–29
  11. By: Giovanni Facchini (University of Illinois and University of Milan); Oliver Lorz ( RWTH Aachen University) (RWTH Aachen University); Gerald Willmann (University of Kiel)
    Abstract: The Common European Asylum System calls for increased coordination of the EU countries’ policies towards asylum seekers and refugees. In this paper, we provide a formal analysis of the effects of coordination, explicitly modelling the democratic process through which policy is determined. In a symmetric, two-country citizen-candidate setup, in which accepting asylum seekers in one country generates a cross-border externality in the other, we show that coordination is desirable. Internalizing the externality leads to a welfare improvement over the non–cooperative outcome. However, contrary to suggestions by many observers, we show that allowing for cross-country transfers in the cooperative outcome leads to a welfare inferior outcome because the possibility of compensation exacerbates strategic delegation effects.
    Keywords: Political Economy, Asylum Policy, Migration
    JEL: J61 H77 F22
    Date: 2005
  12. By: Ghosal, Sayantan (Department of Economics, University of Warwick); Proto, Eugenio (Department of Economics, University of Warwick)
    Abstract: Does power sharing between competing elites result in franchise extension to non-elites? In this paper, we argue that competing, risk-averse elites will enfranchise non-elites as in-surance against future, uncertain imbalances in relative bargaining power. We show that negligibly small changes in the bargaining power of non-elites, conditional on enfranchisment, via coalition formation, constrains the bargaining power of the stronger elite and result in discontinuous changes in equilibrium surplus division. Our results are robust to public good provision following enfranchisement when there is reference heterogeneity over the location of the public good across the different elites. We conclude with a comparative analysis of Indian democracy and show that our model is able to account for some of the distinctive features of Indian democracy.
    Keywords: enfranchisemnt ; elite ; non-elites ; conflict ; bargaining ; risk-sharing ; Indian democracy
    JEL: D72 D74 O57
    Date: 2006

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