nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒03‒03
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. A Structural Model of Turnout and Voting in Multiple Elections By Arianna Degan; Antonio Merlo
  2. A formula for the optimal taxation in Probabilistic Voting Models characterized by Single Mindedness By Canegrati, Emanuele
  3. Political Institutions and Economic Growth By Marsiliani, Laura; Renström, Thomas I
  4. The perils of globalization: offshoring and economic insecurity of the American worker By Richard G. Anderson; Charles S. Gascon
  5. Volatility of short term capital flows and socio-political instability in Argentina, Mexico and Turkey By Demir, Firat
  6. Institutions, infrastructure, and trade By Joseph F. Francois; Miriam Manchin
  7. "Organisational learning and the organisational link : The problem of conflict, political equilibrium and truce" By Pierre-André Mangolte
  9. Political economy of anti-corruption reform in two-candidate elections By Evrenk, Haldun
  10. Growth, public investment and corruption with failing institutions By David De La Croix; Clara Delavallade

  1. By: Arianna Degan (Department of Economics, University of Quebec at Montreal); Antonio Merlo (Department of Economics, University of Pennsylvania)
    Abstract: This paper develops a unified approach to study participation and voting in multiple elections. The theoretical setting combines an “uncertain-voter” model of turnout with a spatial model of voting behavior. We apply our framework to the study of turnout and voting in U.S. presidential and congressional elections. We structurally estimate the model using individual-level data for the 2000 elections, and quantify the relationships between observed individual characteristics and unobserved citizens’ ideological preferences, information, and civic duty. We then use the estimated model, which replicates the patterns of abstention, selective abstention, split-ticket voting, and straight-ticket voting observed in the data, to assess the effects of policies that may increase citizens’ information and sense of civic duty on their turnout and voting behavior.
    Keywords: elections, turnout, selective abstention, split-ticket voting
    JEL: D72
    Date: 2006–08–01
  2. By: Canegrati, Emanuele
    Abstract: This work intends to specify a formula for the optimal taxation in Probabilistic Voting Models with Single Mindedness Theory. The goal is to find an equivalent expression to the Ramsey’s rule for a political economy environment where Governments are assumed to be Leviathans rather than benevolents.
    Keywords: probabilistic voting model; single mindedness theory; optimal taxation; positive approach
    JEL: D63 H24 H23 H21 D71 I38 D72 H31 H27 H53 D78
    Date: 2007–02–23
  3. By: Marsiliani, Laura; Renström, Thomas I
    Abstract: We analyze the impact of micro-founded political institutions on economic growth in an overlapping-generations economy, where individuals differ in preferences over a public good (as well as in age). Labour and capital taxes finance the public good and a public input. The benchmark institution is a parliament, where all decisions are taken. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. We compare this constitution to delegation of decision-making, where a spending minister (elected in parliament or appointed by the largest party). Delegation of decision-making tends to yield lower growth, mainly due to the occurrence of production inefficiency.
    Keywords: bargaining; endogenous growth; overlapping generations; taxation; voting
    JEL: D72 D90 H20 H41 O41
    Date: 2007–02
  4. By: Richard G. Anderson; Charles S. Gascon
    Abstract: According to polls from the 2006 congressional elections, globalization and economic insecurity were the primary concerns of many voters. These Americans apparently believe that they have fallen victim to liberal trade polices and that inexorable trends in globalization are destroying the American Dream. In this analysis, we use time series cross-section data from the General Social Survey (GSS) to examine the links among offshoring, labor market volatility, and the demand for social insurance. Unique among the GSS literature, our analysis includes a pseudo-panel model which permits including auxiliary state and regional macroeconomic information.
    Keywords: Globalization ; International economic integration
    Date: 2007
  5. By: Demir, Firat
    Abstract: The paper analyzes the relationship between financial liberalization and socio-political risk by identifying the inter-dependent nature of socio-political and economic fault lines in three developing countries. Unlike the previous research, the current article suggests that domestic socio-political factors cannot be isolated from the fluctuations taking place in the economic arena. In particular, we examine the effects of short-term capital inflows on the recipient countries by exploring the dynamic relationship between the volatility of such flows and socio-political instability. Accordingly, we endogenize the volatility of short term capital inflows with political risk variables where increasing volatility by disrupting market activities and private investment increases socio-political risk, which further feeds into the volatility of such flows. In the empirical analysis using both the Granger causality tests and a simultaneous-equation approach we uncover a contemporaneous relationship between the volatility of short-term capital inflows and socio-political instability. The results also challenge the previous research regarding their use of political variables as purely exogenous from economic variables. Likewise, the legitimacy of the arguments explaining investor cautiousness vis-à-vis political developments in the developing countries with purely domestic factors also becomes questionable.
    Keywords: Capital Account Liberalization; Volatility of Short Term Capital Flows; Socio-Political Instability; Macroeconomic Uncertainty
    JEL: O57 F32 C32 O11
    Date: 2006–05
  6. By: Joseph F. Francois (Department of Economics, Johannes Kepler University Linz, Austria); Miriam Manchin (University College London)
    Abstract: We work with a panel of bilateral trade flows from 1988 to 2002, exploring the influence of infrastructure, institutional quality, colonial and geographic context, and trade preferences on the pattern of bilateral trade. We are interested in threshold effects, and so emphasize those cases where bilateral country pairs do not actually trade. We depart from the institutions and infrastructure literature in this respect, using selection-based gravity modeling of trade flows. We also depart from this literature by mixing principal components (to condense our institutional and infrastructure measures) with a focus on deviations from expected values for given income cohorts to control for multicollinearity. Infrastructure, and institutional quality, are significant determinants not only of export levels, but also of the likelihood exports will take place at all. Our results support the notion that export performance, and the propensity to take part in the trading system at all, depends on institutional quality and access to well developed transport and communications infrastructure. Indeed, this dependence is far more important, empirically, than variations in tariffs in explaining sample variations in North-South trade. This implies that policy emphasis on developing country market access, instead of support for trade facilitation, may be misplaced.
    Keywords: exports; trade; institutions; infrastructure; zero-trade; gravity model
    JEL: O19 F10 F15
    Date: 2007–02
  7. By: Pierre-André Mangolte (CREI - Centre de Recherche en Economie Industrielle - [Université Paris-Nord - Paris XIII])
    Abstract: This article addresses the issue of organisational learning. The starting point for the analysis is the definition of organisational learning proposed by Levitt and March (1988) in terms of the transformation of an organisation's routines. This definition lead to a focus on the "organisational link" or the way in which individual routines and various learning processes are coordinated, thus assuring a degree of organisational coherence. In comparing the different organisational theories of Simon (1947), March and Simon (1958), Cyert and March (1963) and Nelson and Winter (1982), it is demonstrated that those authors that place primary emphasis on the organisation as an processor of information tend to downplay the importance of the social, relational and political dimensions of organisation behaviour. Recognition of the dual nature of the organisational link and of the importance of political determinants leads to the conclusion that individual processes of learning and inference should to be analytically distinguished from "learning" in the sense of a transformation in the organisation's routines.
    Keywords: organisational learning; theory of organisation; routines; coordination
    Date: 2007–02–07
  8. By: Carlos Rodríguez-Sickert; Ricardo Andrés Guzmán; Juan Camilo Cárdenas
    Abstract: We model the dynamic effects of external enforcement on the exploitation of a common pool resource. Fitting our model to the results of experimental data we find that institutions influence social preferences. We solve two puzzles in the data: the increase and later erosion of cooperation when commoners vote against the imposition of a fine, and the high deterrence power of low fines. When fines are rejected, internalization of a social norm explains the increased cooperation; violations (accidental or not), coupled with reciprocal preferences, account for the erosion. Low fines stabilize cooperation by preventing a spiral of negative reciprocation.
    Date: 2006–07–05
  9. By: Evrenk, Haldun
    Abstract: We analyze the effectiveness of some commonly discussed anti--corruption reforms on political corruption, using a theoretical model of competition between two candidates in a probabilistic voting setup. Candidates, who may differ both in their ability to produce the public good, and popularity with voters, propose a tax rate and a public good level. The budget constraint implies that taxes collected must equal the sum of funds used in public good production plus funds stolen by the elected politician. We identify the conditions under which constitutional constraints on policies, higher penalties for corruption, and higher wages for elected politicians increase (or decrease) voters' welfare. We discuss how the asymmetric information and the rigidity of constitutions reduce the effectiveness of the reforms, and how distributional effects of reforms may reduce the voters' support for a welfare--improving reform. Finally, we argue that effective reforms may not be proposed by both corrupt and honest politicians.
    Keywords: Political Agency; Constitutional Design; Political Economy of Reform
    JEL: D72 K42
    Date: 2002–10
  10. By: David De La Croix (CORE - Department of Economics - [Université Catholique de Louvain]); Clara Delavallade (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: Corruption is thought to prevent poor countries from catching-up. We analyze one channel through which corruption hampers growth : public investment can be distorted in favor of specific types of spending for which rent-seeking is easier and better concealed. To study this distorsion, we propose an optimal growth model where households vote for the composition of public spending subject to an incentive constraint reflecting individuals' choice between productive activity and rent-seeking. At equilibrium, the intensity of corruption and the structure of public investment are determined by the predatory technology and the distribution of political power. Among different regimes, the model shows a possible scenario of distortion without corruption in which there is no effective corruption yet still the possibility of corruption distorts the allocation of public investment, thus hampering growth. We test the implications of the model on a panel of countries estimating a system of equations with instrumental variables. We find that countries with a high predatory technology invest more in housing and physical capital in comparison with health and education. For equal initial conditions, such countries grow slower and have higher corruption, in particular when political power is concentrated.
    Keywords: Public investment, optimal growth, corruption, political power.
    Date: 2007–02–08

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