nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒06‒23
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Fixing the Quorum: Representation versus Abstention By Sanne Zwart
  2. Voting, Lobbying and the Decentralization Theorem By Ben Lockwood
  3. The Growth Effect of Democracy: Is It Heterogeneous and How Can It Be Estimated? By Persson, Torsten; Tabellini, Guido
  4. The Political Economy of Housing Supply:Homeowners, Workers, and Voters By Francois Ortalo-Magne; Andrea Prat
  5. Making Autocracy Work By Timothy Besley; Masayuki Kudamatsu
  6. Organized Business, Political Regimes and Property Rights across the Russian Federation By William Pyle
  7. Education, Corruption and Constitutional Reform By Theo Eicher; Cecilia García-Peñalosa; Tanguy van Ypersele
  8. The perils of globalization: offshoring and economic insecurity of the American worker By Richard G. Anderson; Charles S. Gascon
  9. Group polarization in the team dictator game reconsidered By Wolfgang Luhan; Martin Kocher; Matthias Sutter
  10. Corruption and trade protection: evidence from panel data By Subhayu Bandyopadhyay; Suryadipta Roy
  11. Democratization and Child Mortality By Kiessling, Johan

  1. By: Sanne Zwart
    Abstract: The majority of the participating voters in referenda does not necessarily reflect the majority of the whole population since voters can abstain. This paper shows that a quorum exists for which the outcome of the referendum coincides with the population preference. However, a second equilibrium can exist in which the proposal is always rejected. When insu±cient information makes the optimal quorum unknown, it is in general more harmful to set the quorum too high than too low. Robustness of the results is analyzed by allowing pressure groups to encourage or discourage participation after the quorum is set.
    Keywords: Electoral engineering, quorum, referendum, voting/not-voting decision, voting rules
    JEL: D72
    Date: 2007
  2. By: Ben Lockwood
    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
  3. By: Persson, Torsten; Tabellini, Guido
    Abstract: We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular, we find an average negative effect on growth of leaving democracy on the order of -2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel. Heterogenous characteristics of reforming and non-reforming countries appear to play an important role in driving these results.
    Keywords: democracy; economic growth; matching estimators
    JEL: H11 O11
    Date: 2007–06
  4. By: Francois Ortalo-Magne; Andrea Prat
    Abstract: Equilibrium of the housing market depends on a complex set of interactions between: (1)individual location decisions; (2) individual housing investment; (3) collective decisions onurban growth. We embed these three elements in a model of a dynamic economy with twosources of friction: ill-de…ned property rights on future land development and uninsurableshocks a¤ecting labor productivity. We characterize the feedback between the households’desire to invest in housing as a hedge against the risk of rent ‡uctuations and their supportfor supply restrictions once they own housing. The model generates an ine¢ ciently lowsupply of housing in equilibrium. The model also rationalizes the persistence of housingundersupply: the more restricted the initial housing supply, the smaller the city size selectedby the voting process. We use the model to study the e¤ects of a number of policies andinstitutional changes.
    Keywords: Housing Supply, Housing Demand, Regulatory Policies, Political Economy.
    JEL: R31 R21 R38 D72
    Date: 2007–01
  5. By: Timothy Besley; Masayuki Kudamatsu
    Abstract: One of the key goals of political economy is to understand how institutional arrangementsshape policy outcomes. This paper studies a comparatively neglected aspect of this - theforces that shape heterogeneous performance of autocracies. The paper develops a simpletheoretical model of accountability in the absence of regularized elections. Leadershipturnover is managed by a selectorate - a group of individuals on whom the leader depends tohold onto power. Good policy is institutionalized when the selectorate removes poorlyperforming leaders from office. This requires that the selectorate's hold on power is not toodependent on a specific leader being in office. The paper looks empirically at spells ofautocracy to establish cases where it has been successful according to various objectivecriteria. We use these case studies to identify the selectorate in specific instances of successfulautocracy. We also show that, consistent with the theory, leadership turnover in successfulautocracies is higher than in unsuccessful autocracies. Finally, we show by exploitingleadership deaths from natural causes that successful autocracies appear to have found waysfor selectorates to nominate successors without losing power - a feature which is alsoconsistent with the theoretical approach.
    Keywords: Keywords: dictatorship, democracy
    JEL: P16 P26
    Date: 2007–05
  6. By: William Pyle
    Abstract: This article explores the inter-relationship of collective action within the business community, the nature of the political regime and the security of firms’ property rights. Drawing on a pair of surveys recently administered in Russia, we present evidence that post-communist business associations have begun to coordinate business influence over state actors in a manner that is sensitive to regional politics. A firm’s ability to defend itself from government predation and to shape its institutional environment as well as its propensity to invest in physical capital are strongly related to both its membership in a business association and the level of democratization in its region. Of particular note, the positive effect of association membership on securing property rights increases in less democratic regions. The evidence, that is, suggests that collective action in the business community substitutes for democratic pressure in constraining public officials.
    Date: 2007–03
  7. By: Theo Eicher; Cecilia García-Peñalosa; Tanguy van Ypersele
    Abstract: We model the two way interaction between education, corruption and the level of output. Corruption reduces income levels and hence educational attainment. Education in turn affects the incentives for corruption: more education increases output and thus the rents from corruption, but it also increases the probability that the electorate identifies corrupt behavior and ousts the incumbent politician. In this context, we identify the conditions under which an opportunist politician has the incentives to take actions that will allow the economy to escape from a poverty trap. Our analysis shows that the relationship between education, output levels and the level of corruption is non-monotonic, and that both institution-led development and education-led development are possible. Which path occurs crucially depends on the initial level of inequality.
    Date: 2006–10
  8. 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
  9. By: Wolfgang Luhan; Martin Kocher; Matthias Sutter
    Abstract: While most papers on team decision-making find that teams behave more selfishly, less trustingly and less altruistically than individuals, Cason and Mui (1997) report that teams are more altruistic than individuals in a dictator game. Using a within-subjects design we re-examine group polarization by letting subjects make individual as well as team decisions in an experimental dictator game. In our experiment teams are more selfish than individuals, and the most selfish team member has the strongest influence on team decisions. Various explanations for the different findings in Cason and Mui (1997) and in our paper are discussed.
    Keywords: Experiment, dictator game, team behavior, social preferences
    JEL: C72 C91 C92 D70
    Date: 2007–07
  10. By: Subhayu Bandyopadhyay; Suryadipta Roy
    Abstract: This paper provides new estimates of the effects of corruption and poor institutions on trade protection. It exploits data on several measures of trade protection including import duty, international trade taxes, and the trade-GDP ratio. The paper complements the literature on the relationship between corruption and trade reform. It deviates from the previous literature in several ways. First, unobserved heterogeneity among countries have been controlled with properly specified fixed effects exploiting the time dimension present in the dataset. Secondly, instead of using tariff and non-tariff barriers, more general measures of trade protection have been used. The issue of endogeneity of corruption with respect to trade policy has been addressed using proper instruments for corruption used in previous studies. Moreover, two separate institutional measures have been used in the same regression to estimate their comparative impacts on trade policy. In general, we find that corruption and lack of contract enforcement have strong impacts to increase trade protection and negative effects on trade openness.
    Keywords: Tariff ; International trade
    Date: 2007
  11. By: Kiessling, Johan (Dept. of Economics, Stockholm University)
    Abstract: The Millennium Development Goals call for a two-thirds reduction in under-five mortality rate by 2015. Can democratic reforms contribute to this goal? The focus of previous studies has mainly been on verifying the existence of a relationship between democracy and child mortality and not on the dynamics of the relationship. This paper addresses this question by empirically testing the dynamic effects of important changes in the level of democracy on the percentage change in child mortality using a distributed lag model. The findings are that during the 5 to 20 years following a democratic transition child mortality decreases significantly. Following this decrease, child mortality stabilizes at a new, lower level. Disaggregating democratic transitions into different subcomponents the finding is that the single most important aspect for child mortality is the competitiveness of executive recruitment. The results on the effects of an autocratic experience are more inconclusive. Initially the effects of a negative shock to the political system seem to mirror those of a positive shock, child mortality increases for a number of years but there is no conclusive sign of child mortality stabilizing at a new level and the results are not as stable as for positive democratic changes.
    Keywords: Human Development; Democratization; Child Mortality
    JEL: I10 O15
    Date: 2007–06–18

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