nep-pol New Economics Papers
on Positive Political Economics
Issue of 2006‒09‒30
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Reliability and Responsibility: A Theory of Endogenous Commitment By Matteo Triossi
  2. Constitutions and the resource curse By Jørgen Juel Andersen; Silje Aslaksen
  3. Lobbying, Corruption and Political Influence By Nauro F. Campos; Francesco Giovannoni
  4. Fairness and Direct Democracy: Theory and Evidence By Sanjit Dhami; Ali al-Nowaihi
  5. The Looks of a Winner: Beauty, Gender and Electoral Success By Berggren, Niclas; Jordahl, Henrik; Poutvaara, Panu
  6. The Social Contract with Endogenous Sentiments By Matteo Cervellati; Joan Esteban; Laurence Kranich
  7. Believing in Economic Theory: Sex, Lies, Evidence, Trust and Ideology By Nathaniel Wilcox
  8. Political Discourse in Football Coverage – The Cases of Côte d’Ivoire and Ghana By Andreas Mehler
  9. A spatial analysis of the XIII Italian Legislature By Massimiliano Landi; Riccardo Pelizzo
  10. What explains attitudes towards tax levels? A multi-tax comparison By Hammar, Henrik; Jagers, Sverker C.; Nordblom, Katarina
  11. Unemployment and Clientelism: The Piqueteros of Argentina By Ponce, Aldo Fernando
  12. Voting as a Credible Threat By John Londregan; Andrea Vindigni
  13. A Theory of Rent Seeking with Informational Foundations By Johan N.M. Lagerlöf
  15. Leading the Party: Coordination, Direction, and Communication By Torun Dewan; David P. Myatt
  16. Firm Size, Economic Situation and Influence Activities By Matthias Kräkel
  17. Interpreting the Predictive Uncertainty of Presidential Elections By Ray C. Fair
  18. COALITIONS, AGREEMENTS AND EFFICIENCY By Effrosyni Diamantoudi; Licun Xue

  1. By: Matteo Triossi
    Abstract: A common assumption in Political Science literature is policy commitment: candidates maintain their electoral promises. We drop such assumption and we show that costless electoral campaign can be an effective way of transmitting information to voters. The result is robust to relevant equilibrium refinements. An unavoidable proportion of ambiguous politicians emerges.
    Keywords: Information Transmission, Electoral Campaign, Endogenous Commitment.
    JEL: D72 P16 C73
    Date: 2006
  2. By: Jørgen Juel Andersen (Department of Economics, Norwegian University of Science and Technology); Silje Aslaksen (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Recent advances in the political economy literature suggests that constitutional arrangements determine a wide range of economic pol icy outcomes. In particular, it is argued that different forms of government (presidential versus parliamentary) induce more or less 'growth promoting' policies. However, effects on long run growth have proved harder to identify. We exploit the fact that natural resources are randomly distributed to identify differences in the long-term performance of economies with different constitutional forms. Existing theory suggests that the presence of vast natural resources should affect growth differently in countries with different constitutional designs. Empirically we find strong support for this hypothesis - constitutions indeed seem to matter for how natural resource abundance affects long run growth. In fact, the form of government matters more than democratic rule. We also find interaction effects of electoral rules (majority versus proportional voting) and resource abundance on growth, although these effects are less clear-cut and less robust.
    Keywords: Growth; Political economy; Constitution; Resource curse; Institutions.
    JEL: E61 F43 O13 P51 Q32
    Date: 2006–04–29
  3. By: Nauro F. Campos (Brunel University, CEPR and IZA Bonn); Francesco Giovannoni (CMPO, University of Bristol)
    Abstract: Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries.
    Keywords: lobbying, corruption, transition, institutions
    JEL: E23 D72 H26 O17 P16
    Date: 2006–09
  4. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: The median voter model (direct democracy) has wide applicability in economics. However, it is based on selfish voters i.e. voters who derive utility solely from 'own' payoff. We examine the implications of introducing fair voters who, in addition, also have a preference for fairness (or other regarding preferences) as in Fehr and Schmidt (1999). Within a simple general equilibrium model, we demonstrate the existence of a Condorcet winner for fair voters using the single crossing property of voters’ preferences. In a fair voter model, unlike a selfish voter model, poverty can lead to increased redistribution. Mean preserving spreads of income increase equilibrium redistribution. Greater fairness leads to greater redistribution. The introduction of selfish voters in an economy where the median voter is fair can have a large impact on the redistributive outcome. Empirical evidence based on OECD economies clearly brings out the high importance of fairness, relative to income inequality, in explaining redistribution. We also find support for American Exceptionalism.
    Keywords: Redistribution; other regarding preferences; single peaked preferences; single crossing property; income inequality; American Exceptionalism
    JEL: D64 D72 D78
    Date: 2006–09
  5. By: Berggren, Niclas (The Ratio Institute); Jordahl, Henrik (Research Institute of Industrial Economics); Poutvaara, Panu (University of Helsinki)
    Abstract: We study the role of beauty in politics. For the first time, focus is put on differences in how women and men evaluate female and male candidates and how different candidate traits relate to success in real and hypothetical elections. We have collected 16,218 assessments by 2,772 respondents of photos of 1,929 Finnish political candidates. Evaluations of beauty explain success in real elections better than evaluations of competence, intelli-gence, likability, or trustworthiness. The beauty premium is larger for female candidates, in contrast to findings in previous labor-market studies.
    Keywords: Beauty; gender; elections; political candidates; beauty premium
    JEL: D72 J45 J70
    Date: 2006–09–21
  6. By: Matteo Cervellati (University of Bologna, IAE Barcelona and IZA Bonn); Joan Esteban (IAE Barcelona); Laurence Kranich (University at Albany, SUNY)
    Abstract: In this paper we present a model of rational voting over redistribution where individual selfesteem and relative esteem for others are endogenously determined. Individuals differ in their productivities, and their behaviour and political views are influenced by moral standards concerning work. Agents determine what they take to be proper behaviour and they judge others, and themselves, accordingly, increasing their esteem (or self-esteem) for those who perform in excess of the standard and decreasing their esteem for those who work less. The desired extent of redistribution depends both on individual income and on individual attitudes toward others. The model has two types of equilibria. In a “cohesive” equilibrium, all individuals conform to the standard of proper behaviour, income inequality is low and social esteem is not biased toward any particular type. Under these conditions equilibrium redistribution increases in response to larger inequality. In a “clustered" equilibrium skilled workers work above the mean while unskilled workers work below. In such an equilibrium, income inequality is large and sentiments are biased in favor of the industrious. As inequality increases, this bias may eventually overtake the egoistic demand for greater taxation and equilibrium redistribution decreases. The type of equilibrium to emerge crucially depends on inequality. We contrast the predictions of the model with data on inequality, redistribution, work values and attitudes toward work and toward the poor for a set of OECD countries.
    Keywords: social contract, endogenous sentiments, voting over taxes, social norms, redistribution, inequality, politico-economic equilibrium
    JEL: D64 D72 Z13 H3 J2
    Date: 2006–09
  7. By: Nathaniel Wilcox (Department of Economics, University of Houston)
    Abstract: In many empirical studies, ideology significantly predicts political outcomes, even after controlling for interests. This may reflect ideology’s influence on descriptive beliefs about the workings of the economic world. We investigate these beliefs about supply and demand theory, using survey methods and an experimental demonstration. As expected, relatively liberal respondents have more skeptical ex-ante beliefs (before viewing the experiment) about the theory. Surprisingly, however, relatively conservative respondents update beliefs (after viewing the experiment) so much less strongly that they have more skeptical ex-post beliefs. We explore and discount alternative explanations for these relationships between ideology and beliefs.
    Date: 2004–10
  8. By: Andreas Mehler (GIGA Institute of African Affairs)
    Abstract: Football coverage in newspapers is both an arena for and a mirror of political discourse within a society. The paper argues that discourses within football coverage referring to political issues reflect dominant – and, possibly, contesting – “truths”, which themselves are linked to power relations and political struggles within a given society. The compari-son of Côte d’Ivoire and Ghana, two neighbouring countries in very different conditions (particularly with regard to their historical trajectories and the degree of societal consen-sus), and more particularly, the comparison of dominant discourses on the topics of patri-otism, peace and good governance related to the World Cup qualification of both national teams supports the hypothesis of a strong context-relatedness of a politically loaded “foot-ball language”. For instance, whereas in Ghana patriotism is, when football comes in, quickly merged with pan-africanism, the Ivorian team renewed the heated political debate about “Ivorianess” by putting forward a notion of inclusive patriotism.
    Keywords: football, political discourse, Côte d’Ivoire, Ghana, patriotism, good govern-ance, peace
    Date: 2006–08
  9. By: Massimiliano Landi (School of Economics and Social Sciences, Singapore Management University); Riccardo Pelizzo (School of Economics and Social Sciences, Singapore Management University)
    Abstract: We present a spatial map of the Italian House during the XIII Leg-islature obtained by applying the Poole and Rosenthal methodology to roll call data. We obtain coordinates for almost all the 650 MPs that were on the House's °oor at the time, and we aggregate them according to parties. We ¯nd that voting patters generate basically a two dimensional political space. The ¯rst dimension represents loyalty to either the ruling coalition or the opposing one. The second dimension may describe differences at the constitutional level. This finding is consistent with the exceptional case of the party Northern League, which at the time did not belong to either coalition, and presented itself as a northern and anti-system party. Last, we compute the average dispersion of party coordinates along each dimension and compare them with the Rice index of cohesion, the agreement index (which takes into account abstention), and one other index we construct to account for absence from voting. We ¯nd that absence is significantly correlated with the dispersion of parties along the second dimension. We use this to motivate the importance of further analysis on the massive absence in Italian Parliament from voting sessions.
    Date: 2005–11
  10. By: Hammar, Henrik (NIER); Jagers, Sverker C. (Department of Political Science, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We analyse Swedes’ opinions about the level of taxation for eleven different taxes to see what taxes people are most reluctant to and why. The most unpopular tax is the real estate tax, while the corporate tax is the least unpopular. We find a strong self interest effect in attitudes, and for corrective taxes information increases acceptance. We perform two case studies of Swedish tax policy and find political economy reasons for the recent abolition of the gift and inheritance taxes, and weak support for the ongoing green tax shift from labour to environmental taxes. <p>
    Keywords: tax policy; real estate tax; inheritance tax; gift tax; payroll tax; income tax; vehicle tax; alcohol tax; CO2 tax on petrol and diesel; wealth tax; corporate tax
    JEL: H20 Q58 Z13
    Date: 2006–09–22
  11. By: Ponce, Aldo Fernando
    Abstract: This paper sheds light on possible explanations for the success and sustainability of the piqueteros social movement in Argentina, developed from a comparative perspective based on Latin America. I show which institutional arrangements, political actors, and configurations of power contributed to the success of the piqueteros. Applying the basic principles of the rational choice approach, I find that the success of the piqueteros movement was produced by the current political division in the ruling party (the Peronist party), by the over-regulated Argentine labor market, and by the impact of the Argentine economic crisis through the unemployment rates.
    Keywords: Keywords: unemployment; social movements; federalism; institutions; unions; Argentina.
    JEL: H7 H1 J5 H3 H4 H72 H77 H41 Z13 J50
    Date: 2006–09–01
  12. By: John Londregan; Andrea Vindigni
    Abstract: We offer a rationale for elections that take place in the shadow of power. Factions unhappy with policy can threaten violence. But when they lack common knowledge about (i) one another's rationality, and (ii) their chances of victory at arms, mutual overconfidence can precipitate civil war. We argue that elections can clarify the likely consequences of violence, and so facilitate peaceful resolution. Our theory is based on the recognition that both voting and fighting are intrinsically correlated actions: individuals who undertake the individually irrational act of voting are unusually prone the individually irrational act of voluntary combat.
    Date: 2006
  13. By: Johan N.M. Lagerlöf (Department of Economics, Royal Holloway, University of London)
    Abstract: I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.
    Keywords: Rent seeking, competition, lobbying, information acquisition, disclosure, welfare
    JEL: D42 D43 D72 D83 L13
    Date: 2006–09
  14. By: Macho-Stadler; Licun Xue
    Abstract: Although global free trade is efficient, each country’s benefit from free trade depends on the path that leads to the global free trade agreement. Using a dynamic model of trading bloc formation, we show that when global free trade is reached gradually, the countries that are initially excluded gain less than the rest and may be even made worse-off by the final free trade agreement, compared with the initial state of no trading blocs.
    JEL: C71 C72 F13
    Date: 2006–09
  15. By: Torun Dewan; David P. Myatt
    Abstract: Party activists face a coordination problem: a critical mass (a barrier to coordination) must advocate a single policy alternative if the party is to succeed. The need for direction is the degree to which the merits of the alternatives respond to the underlying mood of the party. An individual`s ability to assess the mood is his sense of direction. These factors combine to form an index of both the desirability and the feasibility of leadership: we call this index Michels` Ratio. A sovereign party conference gives way to leadership by an individual or oligarchy if and only if Michels` Ratio is sufficiently high. Leadership enhances the clarity of intra-party communication, but weakens the response of policy choices to the party`s mood.
    Keywords: Leadership, Direction, Coordination, Communication, Oligarchy
    JEL: D7 D8 H1
    Date: 2006
  16. By: Matthias Kräkel
    Abstract: This paper discusses the optimal firm size in the presence of influence activities, and the level of individual rent-seeking dependent on the economic situation of the firm. Since size has a discouraging effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects determines whether the employer chooses an inefficiently small or large firm size. In the given setting, a bad economic situation leads to both a higher probability of a substantial loss and a reduction of productivity. The productivity effect and the two other effects together determine the optimal level of individual rent-seeking.
    Keywords: economic situation; firm size; influence activities; politicking; rent-seeking
    JEL: D2 L2 M2
    Date: 2006–09
  17. By: Ray C. Fair
    Date: 2006–09–22
  18. By: Effrosyni Diamantoudi; Licun Xue
    Abstract: If agents negotiate openly and form coalitions, can they reach efficient agreements? We address this issue within a class of coalition formation games with externalities where agents’ preferences depend solely on the coalition structure they are associated with. We derive Ray and Vohra’s (1997) notion of equilibrium binding agreements using von Neumann and Morgenstern abstract stable set and then extend it to allow for arbitrary coalitional deviations (as opposed to nested deviations assumed originally). We show that, while the extended notion facilitates the attainment of efficient agreements, inefficient agreements can nevertheless arise, even if utility transfers are possible.
    JEL: C71 C72
    Date: 2006–09

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