nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒05‒12
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Party Formation and Racism By Anesi, Vincent; De Donder, Philippe
  2. Voting as a Lottery. By Giuseppe Attanasi, Luca Corazzini, Francesco Passarelli
  3. Trust in International Organizations: An Empirical Investigation Focusing on the United Nations By Benno Torgler
  4. Voting, Lobbying, and the Decentralization Theorem By Lockwood, Ben
  5. Political institutions and the development of telecomunications By Veneta Andonova; Luis Díaz-Serrano
  6. Measuring Power in Weighted Majority Games By Barua, Rana; Chakravarty, Satya R.; Roy, Sonali
  7. Corruption and Socioeconomics Determinants:Empirical Evidence of Twenty Nine Countries By Halkos, George; Tzeremes, Nickolaos
  8. Women and Budget Deficits By Signe Krogstrup; Sébastien Wälti
  9. Garbled Elections By Patrick W. Schmitz; Thomas Tröger
  10. Special Interest Groups and the Australia-United States Free Trade Agreement By Lukas M. Weber
  11. On the Coleman indices of voting power By Barua, Rana; Chakravarty, Satya R.; Roy, Sonali
  12. Populism and Neopopulism in Latin America: Clientelism, Trade Union Organisation and Electoral Support in Mexico and Argentina in the ‘90s By Veronica Ronchi
  13. Corruption, Inequality, and Environmental Regulation By Jie He; Paul MAKDISSI; Quentin WODON
  14. Predatory States and Failing States: An Agency Perspective By Avinash Dixit
  15. Social capital, rules, and institutions: a cross-country investigation By Thomas Farole; Andrés Rodríguez-Pose; Michael Storper
  16. Inter-Regional Trade and Lobbying By Sergei Guriev; Evgeny Yakovlev; Ekaterina Zhuravskaya

  1. By: Anesi, Vincent; De Donder, Philippe
    Abstract: We develop a model where voters differ in their exogenous income and in their ideological views regarding what we call 'racism'. Electoral competition, modelled à la Levy (2004), takes place between (one or several) parties which propose platforms consisting of both an ideological and an economic dimension. Our objective is to explain the emergence of racist policies when a majority of voters is not racist, and to understand the role played by political parties in this emergence. We first show that, in a pure citizen-candidate model where parties are absent, the only equilibrium consists of the non-racist policy. We then show that allowing for the formation of political parties generates equilibria with racist policies. Finally, our main result states that, if the economic issue is sufficiently salient compared to the ideological one, all equilibria consist of a racist policy, and that the lowest degree of racism of these policies increases with the proportion of poor people in the economy.
    Keywords: electoral competition; polarization; political parties; salience
    JEL: D72
    Date: 2007–05
  2. By: Giuseppe Attanasi, Luca Corazzini, Francesco Passarelli (ISLA, Universita' Bocconi, Milano)
    Abstract: Voting is a lottery in which an individual wins if she belongs to the majority or loses if she falls into the minority. The probabilities of winning and losing depend on the voting rules. The risk of losing can be reduced by increasing the majority threshold. This however has the negative effect of also lowering the chance to win. We compute the individuals preferred majority threshold, as a function of her risk attitudes, her voting power and her priors about how the other individuals will vote. We find that the optimal threshold is higher when an individual is more risk averse, less powerful, and less optimistic about the chance that the others will vote like her. De facto, raising the threshold is a form of protection against the higher risk of being tyrannized by an unfavorable majority.
    Keywords: optimal majority rule, super-majority, risk aversion, weighted votes, voter optimism.
    JEL: D72 D81 H11
    Date: 2007–05
  3. By: Benno Torgler (Queensland University of Technology)
    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
  4. By: Lockwood, Ben (University of Warwick and CEPR)
    Abstract: This paper revisits the fiscal "decentralization theorem", by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. If instead, decisions are made by direct majority voting, (i) centralization can welfare-dominate decentralization even if there are no externalities and regions are heterogenous ; (ii) decentralization can welfare-dominate centralization even if there are positive externalities and regions are homogenous. The intuition is that the insensitivity of majority voting to preference intensity interacts with the different inefficiencies in the two fiscal regimes to give second-best results. Similar results obtain when governments are benevolent, but subject to lobbying, because now decisions are too sensitive to the preferences of the organised group.
    Keywords: Decentralization, majority voting, lobbying, local public goods.
    JEL: H41 H70 H72
    Date: 2007
  5. By: Veneta Andonova (Department of Bussines, Universidad de los Andes); Luis Díaz-Serrano (Grup de Recerca en Economia del Benestar (CREB-GRIT-IZA), Departament d'Economia, Universitat de Barcelona)
    Abstract: It has traditionally been argued that the development of telecommunications infrastructure is dependent on the quality of countries’ political institutions. We estimate the effect of political institutions on the diffusion of three telecommunications services and find it to be much smaller in cellular telephony than in the others. By evaluating the importance of institutions for technologies rather than for industries, we reveal important growth opportunities for developing countries and offer policy implications for alleviating differences between countries in international telecommunications development.
    Keywords: Political constraints, Telecommunications, GMM, Economic development.
    JEL: E32 R10
    Date: 2006–12
  6. By: Barua, Rana; Chakravarty, Satya R.; Roy, Sonali
    Abstract: This paper suggests an indicator of power in weighted majority games. An indicator of power determines the ability of a voter to influence the outcomes of the voting bodies he belongs to. In a weighted majority game each voter is assigned a certain nonnegative real number weight and there is a positive real number quota such that a group of voters can pass a resolution if the sum of the weights of the group members is at least as high as the given quota. The new index is shown to satisfy all the reasonable postulates for an index of voting power. If attention is restricted to weighted majority game only, then this index may be considered as an extension of the Banzhaf-Coleman power indices. Finally, the paper develops an axiomatic char­acterization of the new index.
    Date: 2007–05–07
  7. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: This paper measures the effect of different socioeconomic determinants on countries’ transparency efficiency. Specifically, using Data Envelopment Analysis (DEA), the transparency efficiency of twenty nine countries is calculated. Then with the help of factor analysis we extract two factors from seven socioeconomic variables according to their communality of influence. Finally we set up a logistic regression using the efficiencies derived from DEA and the factors extracted from factor analysis. The results suggest that higher transparency efficiency appears in countries with cultural values of lower power distance, masculinity, uncertainty avoidance and lower individualism. Additionally, lower inflation rates and lower political and economical risks constitute to higher levels of countries’ transparency efficiency while positive GDP growth doesn’t ensure countries’ transparency efficiency.
    Keywords: Perceived transparency; business ethics; cultural dimensions; factor analysis; logistic regression; DEA
    JEL: Z10 C14 C10 M20
    Date: 2007–01–03
  8. By: Signe Krogstrup (IUHEI, The Graduate Institute of International Studies, Geneva); Sébastien Wälti
    Abstract: If women have different economic preferences than men, then female economic and political empowerment is likely to change policy and household decisions, and in turn macroeconomic outcomes. We test the hypothesis that female enfranchisement leads to lower government budget deficits due gender differences in preferences over fiscal outcomes. Estimating the impact of women's vote on budget deficits in a differences-in-differences regression for Swiss cantonal panel data, we find that including women in the electorate reduces average per capita budget deficits by a statistically significant amount.
    Keywords: Budget deficits; Economics-of-gender; enfranchisement; fiscal policy; women; time preference; altruism
    JEL: D7 E6 H6 J16
    Date: 2007–04
  9. By: Patrick W. Schmitz (Department of Economics, University of Cologne, Germany, and CEPR.,˜schmitz.); Thomas Tröger (Department of Economics, University of Bonn, Germany.,
    Abstract: Majority rules are frequently used to decide whether or not a public good should be provided, but will typically fail to achieve an efficient provision. We provide a worst-case analysis of the majority rule with an optimally chosen majority threshold, assuming that voters have independent private valuations and are exante symmetric (provision cost shares are included in the valuations). We show that if the population is large it can happen that the optimal majority rule is essentially no better than a random provision of the public good. But the optimal majority rule is worst-case asymptotically efficient in the large-population limit if (i) the voters’ expected valuation is bounded away from 0, and (ii) an absolute bound for valuations is known.
    Date: 2006–10
  10. By: Lukas M. Weber
    Abstract: In the political economy model of Grossman and Helpman (1995), two incumbent governments attempt to negotiate a free trade agreement (FTA), while special interest groups in each country influence negotiations by offering financial contributions to their governments. As a consequence, a set of politically sensitive industries is excluded from the proposed FTA. Using the empirical methodology of Gawande, Sanguinetti, and Bohara (2001), this paper shows that the Grossman-Helpman (1995) model successfully predicts the set of excluded industries for the recently implemented Australia-United States FTA. It is also shown that the set of exclusions favours Australian interest groups, which could indicate that the gains from the FTA are lower for the government of Australia than for the government of the United States.
    Date: 2006
  11. By: Barua, Rana; Chakravarty, Satya R.; Roy, Sonali
    Abstract: Coleman [1971. Control of collectives and the power of a collectivity to act. In: Lieberman, B. (Ed.), Social Choice. Gordon and Breach, New York, pp. 269–298] suggested two indices of voting power, power to prevent an action and power to initiate an action. This paper rigorously demonstrates relationship between the two indices and shows that they satisfy several attractive properties.
    Keywords: Game theory; Voting game; Voting power; Coleman’s indices; Properties
    Date: 2007–05–07
  12. By: Veronica Ronchi (Università degli Studi di Milano)
    Abstract: The state of anomie that has characterised and still characterises most Latin American countries, resulting from the fragmentation of the social fabric, has encouraged the rise of successful personalist leaderships in the ‘90s. This paper aims at investigating how neopopulism developed in Latin America, considering as main actors the two Presidents who have best embodied this ideal: Carlos Salinas de Gortari, (Mexico 1988-1994) and Carlos Menem (Argentina 1989-1999). Neopopulism is based on an economic project, the neoliberal policy based on cuts in the welfare, which seems very far from the populist positions of the past. Populism revives through the charisma of these Presidents, bypassing institutional or organisational forms of mediation between the leader and the masses. The development of selected social policies has gained strong political support from the lower classes, including extensive institutional reforms.
    Keywords: Latin America, Mexico, Argentina, ’90s, Populism, Neopopulism
    JEL: I38 J88 N16 N26 N36 N46
    Date: 2007–04
  13. By: Jie He (GREDI, Département d'économique, Université de Sherbrooke); Paul MAKDISSI (Departement d’´economique and CEREF, Universite de Sherbrooke, 2550 boulevard de l’Universite, Sherbrooke, Québec, Canada, J1K 2R1); Quentin WODON (LCSPR, World Bank, 1818 H Street, NW, Washington, DC 20433, USA)
    Abstract: We develop two public choice models in which environmental regulation is determined endogenously in the presence of agents who are heterogenous in wealth or income. In the first model, regulation is determined by a majority vote, and an increase in inequality induces an increase in environmental standard. In the second model, the environmental standard is chosen by a corrupt bureaucrat. In that model, while the impact of an increase in inequality on the environmental standard is uncertain, a higher level of corruption always reduces the quality of environmental regulation. An empirical analysis using cross-country data confirms the implication of both models.
    Keywords: Environmental regulation, corruption, inequality
    JEL: Q56 Q58
    Date: 2007
  14. By: Avinash Dixit (Princeton University)
    Abstract: In any non-trivial state, policies decided at the top levels of government are administered by middle-level bureaucrats. I examine whether this agency problem can contribute to explaining state failure in matters of provision of public goods. I find some theoretical arguments to support the view that failure is more likely in states whose top rulers have predatory motives. When the bureaucrats’ cost of providing the public good is their private information, rulers must give them incentive rents to achieve truthful revelation. Predatory rulers are less willing to part with such rents; therefore they tolerate more downward distortion in the provision of public goods to reduce the required rent-sharing. When the bureaucrats’ actions are also unobservable, there is a synergistic interaction between more benevolent rulers and more caring or professional bureaucrats. However, these effects manifest themselves differently and to different degrees under different conditions of information. Therefore precise explanations or predictions in individual instances require context-specific analyses.
    Date: 2006–06
  15. By: Thomas Farole (London School of Economics); Andrés Rodríguez-Pose (London School of Economics); Michael Storper (London School of Economics)
    Abstract: Research on the institutional foundations of economic development emphasizes either rulebound systems of exchange or informal bonds between individuals and within small groups. This corresponds to a classical division in social science, between the forces of society and those of community. This cleavage largely ignores their interactions, which are likely to shape the institutions that underpin economic development in decisive ways. This paper operationalises and tests how the interaction of the forces of community (or social capital) and society (or rules) impact three types of institutions: those involved in problem solving, those that shape microeconomic efficiency and those that influence social policy, across fiftyeight countries. We find that both community and society are important determinants across all institutional domains, and are in many cases mutually reinforcing, but that different specific aspects of community and society are most relevant to different institutional domains. Instrumental associationalism, whether formal or informal, and a robust rules environment are the most important determinants of positive institutional outcomes.
    Date: 2007–04–27
  16. By: Sergei Guriev (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR)); Evgeny Yakovlev (University of California, Berkeley); Ekaterina Zhuravskaya (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR))
    Abstract: In a federation, local policies with inter-regional spillovers depend on the extent and the nature of local capture. Local lobbyists who have multi-regional scope internalize inter-jurisdictional externalities to a larger extent than the lobbyists with interests in a single region. In particular, multi-regional industrial groups lobby for lower interregional trade barriers than local industrial lobbies. The results are based on a simple model, case-study evidence, and econometric analysis of micro-level panel data from Russia. Controlling for firm-level fixed effects, the performance of firms increases with an increase in the number of neighboring regions captured by multiregional groups. The paper has implications for international trade: lobbying by multinationals should lead to lower protectionism compared to lobbying by national corporations.
    JEL: P26 D78 F15 F23
    Date: 2007–04

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