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on Positive Political Economics |
| By: | Aragones, Enriqueta; Palfrey, Thomas R.; Postlewaite, Andrew |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:clt:sswopa:1258&r=pol |
| By: | Erik Snowberg; Justin Wolfers; Eric Zitzewitz |
| Abstract: | To understand the extent to which partisan majorities in Congress influence economic policy, we compare financial market responses in recent midterm elections to Presidential elections. We use prediction markets tracking election outcomes as a means of precisely timing and calibrating the arrival of news, allowing substantially more precise estimates than a traditional event study methodology. We find that equity values, oil prices, and Treasury yields are slightly higher with Republican majorities in Congress, and that a switch in the majority party in a chamber of Congress has an impact that is only 10-30 percent of that of the Presidency. We also find evidence inconsistent with the popular view that divided government is better for equities, finding instead that equity valuations increase monotonically, albeit slightly, with the degree of Republican control. |
| JEL: | D72 G13 G14 H0 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12751&r=pol |
| By: | Daron Acemoglu; Davide Ticchi; Andrea Vindigni |
| Abstract: | Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient state structure. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that in order to generate enough political support, the coalition of the rich and bureaucrats may not only choose an inefficient organization of the state, but they may further expand the size of bureaucracy so as to gain additional votes. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking. |
| JEL: | H11 H26 H41 P16 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12748&r=pol |
| By: | Daron Acemoglu; Georgy Egorov; Konstantin Sonin |
| Abstract: | We study the formation of a ruling coalition in political environments. Each individual is endowed with a level of political power. The ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources. A ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it, and it needs to be self-enforcing, in the sense that none of its sub-coalitions should be able to secede and become the new ruling coalition. We first present an axiomatic approach that captures these notions and determines a (generically) unique ruling coalition. We then construct a simple dynamic game that encompasses these ideas and prove that the sequentially weakly dominant equilibria (and the Markovian trembling hand perfect equilibria) of this game coincide with the set of ruling coalitions of the axiomatic approach. We also show the equivalence of these notions to the core of a related non-transferable utility cooperative game. In all cases, the nature of the ruling coalition is determined by the power constraint, which requires that the ruling coalition be powerful enough, and by the enforcement constraint, which imposes that no sub-coalition of the ruling coalition that commands a majority is self-enforcing. The key insight that emerges from this characterization is that the coalition is made self-enforcing precisely by the failure of its winning sub-coalitions to be self-enforcing. This is most simply illustrated by the following simple finding: with a simple majority rule, while three-person (or larger) coalitions can be self-enforcing, two-person coalitions are generically not self-enforcing. Therefore, the reasoning in this paper suggests that three-person juntas or councils should be more common than two-person ones. In addition, we provide conditions under which the grand coalition will be the ruling coalition and conditions under which the most powerful individuals will not be included in the ruling coalition. We also use this framework to discuss endogenous party formation. |
| JEL: | C71 D71 D74 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12749&r=pol |
| By: | Casella, Alessandra; Palfrey, Thomas R.; Riezman, Raymond |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:clt:sswopa:1261&r=pol |
| By: | Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:clt:sswopa:1263&r=pol |
| By: | David Card (Department of Economics, University of California, Berkeley and Centre for Research and Analysis of Migration (CReAM)); Christian Dustmann (Department of Economics and Centre for Research and Analysis of Migration (CReAM), University College London); Ian Preston (Department of Economics and Centre for Research and Analysis of Migration (CReAM), University College London) |
| Abstract: | Immigration control is an issue that figures prominently in public policy discussions and election campaigns throughout Europe. Although immigration may have positive effects on economic efficiency and growth in the receiving economy, it is often the negative aspects -or perceived negative aspects - of immigration that attract the most attention. In this paper, we use the immigration module of the European Social Survey (ESS), which we developed in collaboration with the ESS survey team, to investigate public opinions about immigration, and the various dimensions of economic, public and private life that individuals feel are affected by immigration. We show that that there is substantial variation in the strength of anti-immigrant opinion across European countries, and that attitudes toward immigration also vary systematically with characteristics such as age, education, and urban/rural location. We propose possible interpretations of some of these regularities. |
| Keywords: | Migration, Survey, Attitudes |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:0305&r=pol |