nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒07‒21
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. When Inertia Generates Political Cycles By Raphäel Soubeyran
  2. Evaluation of Parties and Coalitions After Parliamentary Elections By Andranik Tangian
  3. The Economics of Young Democracies: Policies and Performance By Ethan Kapstein; Nathan Converse
  4. Coalition Governments in a Model of Parliamentary Democracy By Siddhartha Bandyopadhyay; Mandar Oak
  5. The Politics of Market Selection By Luis Eduardo Quintero
  6. On the Distribution of Education and Democracy By Amparo Castello Climent
  7. The Effects of Political Fragmentation on Fiscal Deficits in Turkey By Yesim Kustepeli; Gülcan Önel
  8. The Paradox of Voter Participation? A Laboratory Study By David K. Levine; Thomas R. Palfrey
  9. Does Diversity Drive Down Trust? By Eric M. Uslaner
  10. Valence Advantages and Public Goods Consumption: Does a Disadvantaged Candidate Choose an Extremist Position? By Raphaël Soubeyran
  11. A Theory of Voting Patterns and Performance in Private and Public Committees By Daniel Seidmann
  12. Perverse Committee Appointments May Foster Divide and Rule By Daniel Seidmann
  13. Competitive Proposals of Policies by Lobbies By Ashish Chaturvedi; Amihai Glazer
  14. Efficiency, Equity, and Timing in Voting Mechanisms By Marco Battaglini; Rebecca Morton; Thomas R. Palfrey
  15. Coalition Formation in Simple Games: The Semistrict Core By Dinko Dimitrov; Claus-Jochen Haake
  16. Minorities and Storable Votes By Alessandra Casella; Thomas Palfrey; Raymond Riezman
  17. Urban Extremism By Jan K. Brueckner; Amihai Glazer
  18. Trust and Religion: Experimental Evidence from Bangladesh By Olof Johansson Stenman; Minhaj Mahmud; Peter Martinsson

  1. By: Raphäel Soubeyran (GREQAM)
    Abstract: We propose a simple infinite horizon of repeated elections with two candidates. Furthermore we suppose that the government policy presents some degree of inertia, i.e. a new government cannot completely change the policy implemented by the incumbent. When the policy inertia is strong enough, no party can win the election a consecutive infinite number of times.
    Keywords: Political Cycles, Inertia
    JEL: D72 H7
    Date: 2006–06
  2. By: Andranik Tangian (Hans Boeckler Foundation)
    Abstract: Five leading German political parties and their coalitions are evaluated with regard to party manifestos and results of the 2005 parliamentary elections. For this purpose, the party manifestos are converted into Yes/No answers to 95 topical questions (Relax the protection against dismissals? Close nuclear power plants? etc.). On each question, every party represents its adherents as well as those of the parties with the same position. Therefore, a party usually represents a larger group than its voters. The popularity of a party is understood to be the percentage of the electorate represented, averaged on all the 95 questions. The universality of a party is the frequency of representing a majority of electors. The questions are considered either unweighted, or weighted by an expert, or weighted by the number of GOOGLE-results for given keywords (the more important the question, the more documents in the Internet). The weighting however plays a negligible role because the party answers are backed up by the party ``ideology'' which determines a high intra-question correlation. The SPD (Social-Democratic Party) did not receive the highest percentage of votes, remains nevertheless the most popular and the most universal German party. A comparison of the election results with the position of German Trade Union Federation (DGB) reveals its high representativeness as well. Finally, all coalitions with two and three parties are also evaluated. The coalition CDU/SPD (which is currently in power) is the most popular, and the coalition SPD/Green/Left-Party (which failed due to personal conflicts) is the most universal.
    Keywords: Parliamentary Election, Fractions, Coalitions, Theory of Voting, Mathematical Theory of Democracy, Indices of Popularity and Universality, German Trade Union Federation (DGB)
    JEL: D71
    Date: 2006–05
  3. By: Ethan Kapstein; Nathan Converse
    Abstract: Since the “third wave” of democratization began in 1974, nearly 100 states have adopted democratic forms of government, including, of course, most of the former Soviet bloc nations. Policy-makers in the west have expressed the hope that this democratic wave will extend even further, to the Middle East and onward to China. But the durability of this new democratic age remains an open question. By some accounts, at least half of the world’s young democracies—often referred to in the academic literature as being “unconsolidated” or “fragile”—are still struggling to develop their political institutions, and several have reverted back to authoritarian rule. Among the countries in the early stages of democratic institution building are states vital to U.S. national security interests, including Afghanistan and Iraq. The ability of fledgling democracies to maintain popular support depends in part on the ability of their governments to deliver economic policies that meet with widespread approval. But what sorts of economic policies are these, and are they necessarily the same as the policies required for tackling difficult issues of economic stabilization and reform? Conversely, what sorts of economic policies are most likely to spark a backlash against young and fragile democratic regimes? Do the leaders of young democracies face trade-offs as they ponder their electoral and economic strategies? These are among the questions we explore in this paper, which provides an overview of the monograph we are currently writing on the economics of young democracies. We do so first by exploring the hypothesized relationships between democratic politics and economic policy, as well as the findings of several important empirical studies with respect to the economic performance of young democracies around the world. We then provide some descriptive statistics on how the new democracies have fared in practice, making use of a new dataset that we have compiled (and which, among other things, is more up-to-date than most others cited herein). Do the data reveal any distinctive economic patterns with respect to democratic consolidation and reversal? We will show that they do. In particular, we find that deteriorating or stagnant economic performance constitutes a red flag or warning signal that the country is at risk of democratic reversal. Moreover, we find considerable variation in economic performance, suggesting that the design of political institutions in new democracies may have a significant influence on the probability of their survival.
    Keywords: Democratic transition
    JEL: O10 N40
    Date: 2006–03
  4. By: Siddhartha Bandyopadhyay (University of Birmingham); Mandar Oak (Williams College)
    Abstract: We analyze the relative importance of party ideology and rents from office in the formation of coalitions in a parliamentary democracy. In equilibrium, the types of coalitions that are formed may be minimal winning, minority or surplus and they may be ideologically `disconnected'. The coalitions that form depend upon the relative importance of rents of office and seat shares of the parties. If rents are high, governments cannot be surplus. With low rents or the formateur close to the median, minority governments occur for a wider ideological dispersion. Further, there is a non-monotonic relationship between connectedness of coalitions and rents.
    Keywords: Coalitions, Ideology, Rents
    JEL: C72 D72 H19
    Date: 2006–06
  5. By: Luis Eduardo Quintero
    Abstract: This work seeks to determine the effect of political power of economic sectors in the policies their plants face, in their market survival probabilities, and in the aggregate productivity of the economy. Data from colombian manufacturing sector at the plant level for the period 1990-1998 is used to estimate several empirical models. Also, political power variables are constructed: dummy variables that indicate membership to economic associations and economic corporate groups, and an index that captures both the economic importance of the plant’s economic sector in the geographical region where it is located, and the electoral influence of that region in the national political scene. In the first place, we estimate the effect of political power on policy variables. For these, we use nominal tariffs, mainly because they show differential treatments between sectors, because they affect all sectors in the economy, and because they represent policies in a quantitatively way, and thus are subject to quantitative modeling. We found that political power of sectors has a significant and positive effect on the tariffs their plants face. This happens both when it comes from belonging to an organized group that can perform lobby activities and when it comes from the political support that the sector’s welfare implies for policy makers. In the second place, a market selection model is estimated to determine the effect of political power on the probability of exit of a plant. We found that a plant that belongs to a more politically influential sector can survive in the market with productivity levels that would otherwise make it go out of business (compared to plants belonging to sectors with less political power). Third, the economy’s aggregate productivity is calculated with and without the effect of political power. We find that, since this effect allows less productive plants to survive, aggregate productivity is decreased an average of 9.86% per year.
    Date: 2006–06–01
  6. By: Amparo Castello Climent (Institute of International Economics, University of Valencia)
    Abstract: This paper empirically analyzes the influence of the distribution of education on democracy by controlling for unobservable heterogeneity and by taking into account the persistency of some of the variables. The most novel finding is that increase in the education attained by the majority of the population is what matters for the implementation and sustainability of democracy, rather than the average years of schooling. We show this result is robust to issues pertaining omitted variables, outliers, sample selection, or a narrow definition of the variables used to measure democracy.
    Keywords: Democracy, political economy, education inequality, dynamic panel data model
    JEL: O10 P16
    Date: 2006–06
  7. By: Yesim Kustepeli (Department of Economics, Faculty of Business, Dokuz Eylül University); Gülcan Önel (Department of Economics, Faculty of Business, Dokuz Eylül University)
    Abstract: Recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued (Volkerink and de Haan, 2001). The experience of high government deficits of developed nations in the 1980s led researchers to analyze the reasons for this and among other factors they have argued that political variables could also explain budget deficits (Sutter, 2003). This study aims to investigate the effects of the political parties for fiscal deficits in Turkey for 1976-2004 period. Our results show that the most important variable in explaining the budget deficit to GDP ratio in Turkey is its lagged value. The political dispersion index variable, which measures the effect of the number of parties in the government in power, has proven to have a minor effect. Only the coalition governments with two or more parties are found to have higher budget deficit to GDP ratios. Ideology of the governments in power is important for the budget deficit to GDP ratio when it is considered with the number of parties in the government in power. In general, it can be said that polarization, fragmentation and ideology of the governments do not play an important role in explaining the budget deficit to GDP ratio.
    Keywords: Budget deficits, political fragmentation, dispersion indexes
    Date: 2005–11–23
  8. By: David K. Levine; Thomas R. Palfrey
    Date: 2006–07–15
  9. By: Eric M. Uslaner (University of Maryland)
    Abstract: Some researchers claim that diverse populations lead to less trust. Generalized trust is a core value that leads to positive outcomes in societies--from greater tolerance of minority groups and immigrants and willingness to do good deeds, to less corruption, more social welfare and education spending, more open markets, and better functioning government. Generalized trust fundamentally rests upon a foundation of respect for diversity, but at the same time arguing that societies have a common culture. It is the idea that people have a shared fate. Generalized trust rests upon a foundation of economic equality. Yet some claim that diversity leads to less trust rather than more trust. Trusting people who are different from yourself is atypical of most people, they claim. I dispute this--arguing that generalized trust is largely unrelated to population diversity. It is not diversity that matters--it is how populations are distributed. I show that trust is lower not in diverse societies, but rather in societies with large minority groups that are segregated from the majority groups. Minority residential segregation leads to less trust because it leads to less interaction across different groups in society--and leads minorities to associate only with each other, to form their own political organizations, and to see their fate as less dependent upon majority groups. I then discuss how economic inequality and the rule of law shape the relationship between trust and minority residential segregation.
    Keywords: Trust, Diversity, Corruption
    JEL: Z13 O57 D73
    Date: 2006–04
  10. By: Raphaël Soubeyran (Université de la Mediterrannée)
    Abstract: Does a disadvantaged candidate always choose an extremist program? When does a less competent candidate have an incentive to move to extreme positions in order to differentiate himself from the more competent candidate? If the answer to these questions were positive, as suggested in recent work (Ansolabehere and Snyder (2000), Aragones and Palfrey (2002), Groseclose (1999), and Aragones and Palfrey (2003)), this would mean that extremist candidates are bad politicians. We consider a two candidates electoral competition over public consumption, with a two dimensional policy space and two dimensions of candidates heterogeneity. In this setting, we show that the conclusion depends on candidates relative competences over the two public goods and distinguish between two types of advantages (an absolute advantage and comparative advantage in providing the two public goods).
    Keywords: Candidate Quality, Extremism, Public Goods Consumption
    JEL: C72 D72
    Date: 2006–06
  11. By: Daniel Seidmann (University of Nottingham)
    Abstract: We analyze voting in private and public committees whose members care about the selected decision and the rewards which outsiders pay for representing their interests. We characterize the voting pattern and performance in both committees; and we test these implications on the voting patterns of monetary policy committees.
    Date: 2006–04
  12. By: Daniel Seidmann (University of Nottingham)
    Abstract: We analyze optimal appointments to a committee whose members play an admissibly coalition proof equilibrium. The nominator may appoint a candidate with the opposite preference ordering over the agenda, as the committee would then reach the nominator’s top ranked decision by divide and rule: the majority who prefer another decision are immobilised by internal divisions. Our results may explain why Disraeli extended the franchise to skilled male workers in 1867 against centrist opposition; and why an electorate whose preferences are not polarized may choose a polarized voting pattern.
    Date: 2006–04
  13. By: Ashish Chaturvedi (WZ-Berlin, Germany); Amihai Glazer (Department of Economics, University of California-Irvine)
    Abstract: We consider a policymaker who must choose between the status quo and proposals made by lobbyists. Each lobbyist aims to maximize the tariff accorded his industry, but realizes that if he proposes too high a tariff, the policymaker may choose the proposal offered by another lobbyist which incorporates a lower tariff. The equilibrium has a positive probability that the policymaker who aims to maximize social welfare adopts a tariff higher than the one he prefers.
    Date: 2005–11
  14. By: Marco Battaglini; Rebecca Morton; Thomas R. Palfrey
    Date: 2006–07–15
  15. By: Dinko Dimitrov (Bielefeld University); Claus-Jochen Haake (Bielefeld University)
    Abstract: We consider the class of proper monotonic simple games and study coalition formation when an exogenous share vector and a solution concept are combined to guide the distribution of coalitional worth. Using a multiplicative composite solution, we induce players' preferences over coalitions in a hedonic game, and present conditions under which the semistrict core of the game is nonempty.
    Keywords: Coalition Formation, Paradox of Smaller Coalitions, Semistrict Core, Simple Games, Winning Coalitions
    JEL: D72 C71
    Date: 2006–05
  16. By: Alessandra Casella; Thomas Palfrey; Raymond Riezman
    Date: 2006–07–15
  17. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Amihai Glazer (Department of Economics, University of California-Irvine)
    Abstract: Consider two types of residents, who prefer two different values of a policy. A current majority in some city, seeking to increase the probability that it will set policy in the following period, may adopt current policies that are particularly unattractive to the minority, leading some members of the minority to emigrate. Such behavior can lead to extremist policies, to wasteful taxes, and to similar inefficiencies.
    Date: 2006–01
  18. By: Olof Johansson Stenman (Göteborg University); Minhaj Mahmud (Keele University, Centre for Economic Research and School of Economic and Management Studies); Peter Martinsson (Göteborg University)
    Abstract: Trust is measured using both survey questions and a standard trust experiment among a random sample of Muslim and Hindu household heads in rural Bangladesh. We found no significant effect of the social distance between Hindus and Muslims in the trust experiment in terms of fractions sent or returned, but the responses to the survey questions do indicate significant differences. Hindus, the minority, trust other people less in general, while Hindus trust Muslims more than Muslims trust Hindus.
    Keywords: Social capital; Trust; Social distance; Religion; Trust game; field experiment; Bangladesh.
    JEL: C93 Z12 Z13
    Date: 2006–06

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