nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒04‒09
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Vote Buying By Eddie Dekel; Matthew O. Jackson; Asher Wolinsky
  2. Strategic Delegation and Voting Rules By Bard Hastad
  3. Voting in small networks with cross-pressure By Ascensión Andina-Díaz; Miguel A. Meléndez-Jiménez
  4. Informational Lobbying under the Shadow of Political Pressure By Matthias Dahm; Nicolas Porteiro
  5. Political Autonomy and Independence: Theory and Experimental Evidence By Klaus Abbink; Jordi Brandts
  6. Public Sector Efficiency: The Roles of Political and Budgetary Institutions, Fiscal Capacity and Democratic Participation By Lars-Erik Borge; Torberg Falch; Per Tovmo
  7. Vote Buying II: Legislatures and Lobbying By Eddie Dekel; Matthew O. Jackson; Asher Wolinksy
  8. A Single-Mindedness model with n generations By Emanuele, Canegrati
  9. Political labor market, government policy, and stability of a non-democratic regime By Lazarev, Valery
  10. The Influence of Elections on Compliance with World Bank Conditionality and IMF Program Interruptions By Dreher, Axel
  11. Factions and Political Competition By Nicola Persico; José Carlos Rodríguez-Pueblita; Dan Silverman
  12. Strategic Voting over Strategic Proposals, Second Version By Philip Bond; Hülya Eraslan
  13. Insurgency and credible commitment in autocracies and democracies By Keefer, Philip
  14. Trust in International Organisations: An Empirical Investigation Focusing on the United Nations By Benno Torgler
  15. Does the IMF cause moral hazard and political business cycles? Evidence from panel data By Dreher, Axel; Vaubel, Roland
  16. Monetary Policy and the Political Support for a Labor Market Reform By ÿlvaro Aguiar; Ana Paula Ribeiro
  17. Redealing the Cards: How the Presence of an Eco-Industry Modifies the Political Economy of Environmental Policies By Joan Canton
  18. A Political Economy Model of Congressional Careers By Daniel Diermeier; Michael Keane; Antonio Merlo
  19. Voting behavior in a city of poor workers and rich entrepreneurs: Local contextual effects and class voting in the Mexico City metropolitan area, 1994-2000 By Vilalta y Perdomo, Carlos J.

  1. By: Eddie Dekel; Matthew O. Jackson; Asher Wolinsky
    Abstract: We examine the consequences of vote buying, assuming this practice were allowed and free of stigma. Two parties competing in a binary election may purchase votes in a sequential bidding game via up-front binding payments and/or campaign promises (platforms) that are contingent upon the outcome of the election. We analyze the role of the parties’ budget constraints and voter preferences. For instance, if only campaign promises are allowed, then the winning party depends not only on the relative size of the budgets, but also on the excess support of the party with the a priori majority, where the excess support is measured in terms of the (minimal) total utility of supporting voters who are in excess of the majority needed to win. If up front vote buying is permitted, and voters care directly about how they vote (as a legislator would), then the determination of the winning party depends on a weighted comparison of the two parties’ budgets plus half of the total utility of their supporting voters. These results suggest that vote buying can lead to an inefficient party winning in equilibrium. We find that under some circumstances, if parties budgets are raised through donations, then vote buying can be efficient. Finally, we provide some results on vote buying in the face of uncertainty.
    Keywords: vote buying, political economy, campaign promises.
    JEL: P16 C72
  2. By: Bard Hastad
    Abstract: When making collective decisions, principals (voters or districts) typically benefit by strategically delegating their bargaining and voting power to representatives different from themselves. There are conflicting views in the literature, however, of whether such a delegate should be "conservative" (status quo biased) or instead "progressive" relative to his principal. I show how the answer depends on the political system in general, and the majority requirement in particular. A larger majority requirement leads to conservative delegation, but "sincere" delegation is always achieved by the optimal voting rule.
    Keywords: Strategic delegation, collective decisions, voting rules
    JEL: D71 D72 F53 H11
  3. By: Ascensión Andina-Díaz; Miguel A. Meléndez-Jiménez
    Abstract: We present a model of participation in elections in small networks, in which citizens su¤er from cross-pressures if voting against the alternative preferred by some of their social contacts. We analyze how the existence of cross-pressures may shape voting decisions, and so, political outcomes; and how candidates may exploit this e¤ect to their interest.
    Keywords: Network; Voting; Cross-Cutting.
    JEL: D72
  4. By: Matthias Dahm; Nicolas Porteiro
    Abstract: We examine the incentives of an interest group to provide verifiable policy-relevant information to a political decision-maker and to exert political pressure on her. We show that both lobbying instruments are interdependent. In our view information provision is a risky attempt to affect the politician’s beliefs about the desirability of the lobby’s objective. The constraints governing informational lobbying determine a specific lottery available. The circumstances under which political pressure can be applied specify the lobby’s valuation of different beliefs of the politician and, thus, her attitude toward risk. The combination of lotteries available and induced risk preference determines the optimal lobbying behavior. Our approach gives a novel explanation for the fact that interest groups often try to provide information credibly. We identify several factors that induce risk proclivity (and thus information provision). We also show that the availability of political pressure might have a deterrence effect on information provision. This ‘shadow of political pressure’ might impede information provision at all or induce a complementary relationship between both lobbying instruments.
    Keywords: Experts, Influence, Credibility, Political contributions, Issue ads.
    JEL: C72 D72
  5. By: Klaus Abbink; Jordi Brandts
    Abstract: We study the process by which subordinated regions of a country can obtain a more favourable political status. In our theoretical model a dominant and a dominated region first interact through a voting process that can lead to different degrees of autonomy. If this process fails then both regions engage in a costly political conflict which can only lead to the maintenance of the initial subordination of the region in question or to its complete independence. In the subgame-perfect equilibrium the voting process always leads to an intermediate arrangement acceptable for both parts. Hence, the costly political struggle never occurs. In contrast, in our experiments we observe a large amount of fighting involving high material losses, even in a case in which the possibilities for an arrangement without conflict are very salient. In our experimental environment intermediate solutions are feasible and stable, but purely emotional elements prevent them from being reached.
    Keywords: Secession, collective action, independence movements, laboratory experiments, rent-seeking
    JEL: C92 C93 D72 D74
    Date: 2007–03–01
  6. By: Lars-Erik Borge (Department of Economics, Norwegian University of Science and Technology); Torberg Falch (Department of Economics, Norwegian University of Science and Technology); Per Tovmo (Department of Economics, Norwegian University of Science and Technology)
    Abstract: The purpose of this paper is to investigate whether efficiency in public service provision is affected by political and budgetary institutions, fiscal capacity, and democratic participation. In order to address this issue we take advantage of a new global efficiency measure for Norwegian local governments. There is strong evidence that high fiscal capacity and a high degree of party fragmentation contributes to low efficiency. In addition we find that increased democratic participation tends to increase efficiency, while a centralized top down budgetary process is associated with low efficiency.
    Keywords: Public sector efficiency; Political and budgetary institutions; Fiscal capacity; Democratic Participation
    JEL: H72 H75
    Date: 2007–05–01
  7. By: Eddie Dekel; Matthew O. Jackson; Asher Wolinksy
    Abstract: We examine the consequences of lobbying and vote buying, assuming this prac- tice were allowed and free of stigma. Two "lobbyists" compete for the votes of legislators by offering up-front payments to the legislators in exchange for their votes. We analyze how the lobbyists' budget constraints and legislator preferences determine the winner and the payments.
    Keywords: vote buying, lobbying, legislatures, political economy.
    JEL: P16 C72
  8. By: Emanuele, Canegrati
    Abstract: In this paper I will analyse the redistribution of income amongst n generations using the Single-mindedness Theory. I will introduce a new expression for the balanced-budget constraint, no longer based on lump- sum transfers as in the traditional literature, but rather on more realistic labour income taxation. Since the Government has to clear the budget, some generations obtain a benefit, whilst some other must pay the entire cost of social secutiry systems. I will demonstrate that generations which are more single-minded on leisure are the most better off since they are more able to capture politicians in the political competition. Further- more, it could be the case that candidates are not forced to undertake the same policies in equilibrium and I will demonstrate that this result holds only once an endogenous density function for individual preferences for politicians is considered.
    Keywords: income distribution; probabilistic voting models; Single-mindedness; overlapping generations
    JEL: H50 D63 H61 D72 I38 H11 H55 D31 H24 J13 D11 D30 C72 H53 H23 J26 D71 H31 J2 H60 J22 D74
    Date: 2007–04
  9. By: Lazarev, Valery
    Abstract: An important source of stability of a hierarchical non-democratic political regime, such as that of the Soviet Union in the past or China today, is the rulers’ ability to buy the services and political support of activists recruited from the working population in the monopsonistic political labor market. Implicit contracts that underlie this exchange require retirement of incumbents to allow for deferred promotion of activists into rent-paying positions. An analysis of optimal promotion contracts shows that regime stability is consistent with a high income gap between the rulers and the working population, strengthened when government pursues an active investment policy, and not affected positively by government spending on public goods. Predictions of the promotion contract model are tested using Soviet data for the period 1956 to 1968.
    Keywords: non-democracy; political rents; hierarchy; promotion incentives; implicit contract
    JEL: P26 J45 D70
    Date: 2007–03–16
  10. By: Dreher, Axel (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: Using panel data, this paper tries to explain compliance with World Bank conditionality as well as interruptions of IMF programs around election dates in the recipient countries. Compliance with World Bank conditionality is lower in election years and pre-election years. Using a proxy for IMF program interruptions it is shown that breakdowns are less likely in election years. However, no other political factors seem to influence political interruptions and compliance systematically. The paper concludes with implication for reform.
    JEL: D72 F33 F34
  11. By: Nicola Persico; José Carlos Rodríguez-Pueblita; Dan Silverman
    Abstract: This paper presents a new model of political competition where candidates belong to factions. Before elections, factions compete to direct local public goods to their local constituencies. Voters view the public goods as a credible signal that their local candidate is in the right (i.e., powerful) faction. The model of factional competition delivers a rich set of implications relating the internal organization of the party to the allocation of resources. Several key theoretical predictions of the model find a counterpart in our empirical analysis of newly coded data on the provision of water services in Mexico.
    JEL: D72 D73 H4 H54
    Date: 2007–04
  12. By: Philip Bond (Finance Department, The Wharton School, University of Pennsylvania); Hülya Eraslan (Finance Department, The Wharton School, University of Pennsylvania)
    Abstract: Prior research on “strategic voting” has reached the conclusion that unanimity rule is uniquely bad: it results in destruction of information, and hence makes voters worse off. We show that this conclusion depends critically on the assumption that the issue being voted on is exogenous, i.e., independent of the voting rule used. We depart from the existing literature by endogenizing the proposal that is put to a vote, and establish that under many circumstances unanimity rule makes voters better off. Moreover, in some cases unanimity rule also makes the proposing individual better off even when he has diametrically opposing preferences. In this case, unanimity is the Pareto dominant voting rule. Voters prefer unanimity rule because it induces the proposing individual to make a more attractive proposal. The proposing individual prefers unanimity rule because the acceptance probabilities for moderate proposals are higher.
    Keywords: Strategic voting; agenda setting; multilateral bargaining
    JEL: C7 D7 D8
    Date: 2004–09–01
  13. By: Keefer, Philip
    Abstract: This paper suggests a new factor that makes civil war more likely: the inability of political actors to make credible promises to broad segments of society. Lacking this ability, both elected and unelected governments pursue public policies that leave citizens less well-off and more prone to revolt. At the same time, these actors have a reduced ability to build an anti-insurgency capacity in the first place, since they are less able to prevent anti-insurgents from themselves mounting coups. But while reducing the risk of conflict overall, increasing credibility can, over some range, worsen the effects of natural resources and ethnic fragmentation on civil war. Empirical tests using various measures of political credibility support these conclusions.
    Keywords: Population Policies,Parliamentary Government,Economic Theory & Research,Social Conflict and Violence,Politics and Government
    Date: 2007–04–01
  14. By: Benno Torgler
    Abstract: The literature on social capital has strongly increased in the last two decades, but there still is a lack of substantial empirical evidence about the determinants of international trust. This empirical study analyses a cross-section of individuals, using micro-data from the World Values Survey, covering 38 countries, to investigate trust in international organizations, specifically in the United Nations. In line with previous studies on international trust we find that political trust matters. We also find that social trust is relevant, but contrary to previous studies the results are less robust. Moreover, the paper goes beyond previous studies investigating also the impact of geographic identification, corruption and globalization. We find that a higher level of (perceived) corruption reduces the trust in the UN in developed countries, but increases trust in developing and transition countries. A stronger identification with the world as a whole also leads to a higher trust in the UN and a stronger capacity to act globally in economic and political environment increases trust in the UN.
    Keywords: International Organizations, United Nations, International Trust, Political Trust, Social Trust, Corruption, Globalization.
    JEL: Z13 D73 O19
    Date: 2007–04–03
  15. By: Dreher, Axel; Vaubel, Roland (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: Using panel data for 106 countries in 1971 - 1997, we estimate generalized least squares regressions to explain IMF lending as well as monetary and fiscal policies in the recipient countries. With respect to moral hazard, we find that a country`s rate of monetary expansion and its government budget deficit is higher the less it has exhausted its borrowing potential in the Fund and the more credit it has recieved from the Fund. As for political business cycles, our evidence indicates that, even with a considerable number of control variables, IMF credits in the more democratic recipient countries are larger in pre-election and post-election years. Thus, IMF lending seems to faciliate the generation of political business cycles, while IMF conditionality may serve as a scapegoat for unpopular corrective measures after the election. The paper concludes with implications for IMF reform.
    JEL: D72 F33 F34
  16. By: ÿlvaro Aguiar (CEMPRE-Faculdade de Economia do Porto); Ana Paula Ribeiro (CEMPRE-Faculdade de Economia do Porto)
    Abstract: Lagged benefits relative to costs can politically block an efficiency-enhancing labor market reform, lending support to the "two-handed approach". An accommodating monetary policy, conducted alongside the reform, could help bringing the positive effects of the reform to the fore. In order to identify the mechanisms through which monetary policy may affect the political sustainability of a reform, we add stylized features of the labor market to a standard New-Keynesian model for monetary policy analysis. A labor market reform is modeled as a structural change inducing a permanent shift in the flexible-price unemployment and output levels. In addition to the permanent gains, the impact of the timing and magnitude of the reform-induced adjustments on the welfare of workers - employed and unemployed - is crucial to the political feasibility of the reform. Since the adjustments depend, on one hand, on the macroeconomic structure and, on the other hand, can be influenced by monetary policy, we simulate various degrees of output persistence across different policy rules. We find that, if inertia is present, monetary policy affects the political support for the reform. Choosing a particular policy rule, as well as the business cycle timing of the reform, are means to enhance political sustainability
    JEL: E24 E37 E52 E61
    Date: 2007–02–02
  17. By: Joan Canton (GREQAM, Université de la Méditerranée)
    Abstract: An incumbent government maximizes its chances of being reelected. Its objective function encompasses both social welfare and political contributions. Its only instrument is a pollution tax. In an open-economy context, we introduce an eco-industry in addition to lobbies of polluting firms and environmentalists. Not only does the eco-industry lobby add a new political contribution toward a higher environmental tax, it also modifies the incentives of the usual lobbies. When the foreign environmental policy is constant, environmentalists can be in favor of a decrease in the local tax in order to reduce foreign pollution. It could also be in the interest of a vertical industrial pressure group to lobby toward more stringent environmental policy. In general, the impact of lobbying activities on the politically optimal tax is ambiguous as pressure groups push in different directions.
    Keywords: Eco-Industry, Environmental Taxation, Lobbies, Political Economy
    JEL: H23 D72
    Date: 2007–02
  18. By: Daniel Diermeier; Michael Keane; Antonio Merlo
    Abstract: Theories in political economy depend critically on assumptions about motivations of politicians. Our analysis starts from the premise that politicians, like other economic agents, are rational individuals who make career decisions by comparing the expected returns of alternative choices. The main goal of the paper is to quantify the returns to a career in the United States Congress. To achieve this goal we specify a dynamic model of career decisions of a member of Congress and we estimate this model using a newly collected data set. Given estimates of the structural model, we assess reelection probabilities for members of Congress, estimate the effect of congressional experience on private and public sector wages, and quantify the value of a congressional seat. Moreover, we use the estimated model to assess how an increase in the congressional wage or the imposition of term limits would affect the career decisions of politicians and the returns to a career in Congress.
  19. By: Vilalta y Perdomo, Carlos J. (Tecnológico de Monterrey, Campus Ciudad de México)
    Date: 2007–03

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