nep-pol New Economics Papers
on Positive Political Economics
Issue of 2007‒07‒27
four papers chosen by
Eugene Beaulieu
University of Calgary

  1. Is the Bank of Canada any more or less independent than the Fed? By J. Stephen Ferris
  2. Is it Economics or Politics? Trending Economic Factors and the Structure of Congress in the Growth of Government, 1930-2002 By Stanley L. Winer; Michael W. Tofias; Bernard Grofman
  3. The Causes of Excessive Deficits in The European Union By Castro, Vítor
  4. The Enfranchisement of Women and the Welfare State By Bertocchi, Graziella

  1. By: J. Stephen Ferris (Department of Economics, Carleton University)
    Abstract: In this paper I apply the work of Abrams and Iossifov (2006) to monetary policy in canada to see if same political party affiliation is needed to produce evidence of political opportunism. After modifying their anaylsis to maintain consistency in the time series dimensions of their variables for Canada, I find both an error correction model and a Taylor rule of reformulation of their test generate evidence consistent with same party political opportunism, but only weakly so. On the other hand, I find also that more traditional indicators of political influence present even more convincing evidence of political dependence. In particular, the data suggest that the election of a Liberal party government, a decrease in the degree of political competition, and to a lesser extent, the election of a minority government all positively influence the expansiveness of Canadian monetary policy. In combination, these findings are consistent with the hypothesis that the Bank of Canada is less rather than more independent that is the Fed.
    JEL: E52 E58
    Date: 2007–04–29
  2. By: Stanley L. Winer (Department of Economics, Carleton University); Michael W. Tofias (Duke University); Bernard Grofman (University of California, IrvineAuthor-Name: John H. Aldrich; Duke University)
    Abstract: We expand the investigation of the role of Congress in explanations of government growth, building on the work of Kau and Rubin (2002). In addition to reconsidering the importance of the median ideological position of elected representatives they introduced, we allow for the roles of majority party strength and of party control of Congress. We consider the relative importantce of the state of Congress and of trending supply and demand-side economic factors in the evolution and composition of federal spending since 1930, and we use the resulting model to simulate the consequences of the radical and historically unprecedented shift to the right of Congress in 1994/95.
    JEL: H1 H3 H5 H6
    Date: 2006–06–29
  3. By: Castro, Vítor (University of Warwick, University of Coimbra and NIPE)
    Abstract: Several studies have identified the factors that cause public deficits in industrial democracies. They consider that economic, political and institutional factors play an important role in the understanding of those deficits. However, the study of the determinants of excessive deficits remains practically unexplored. Since excessive deficits can have large negative spillover effects when countries are forming a monetary union without a centralised budget – as it is the case for a group of European countries – this paper tries to explore that gap in the literature by identifying the main causes of excessive deficits and the ways of avoiding them. Binary choice models are estimated over a panel of 15 European Union countries for the period 1970-2006, where an excessive deficit is defined as a deficit higher than 3% of GDP. Results show that a weak fiscal stance, low economic growth, the timing of parliamentary elections and majority left-wing governments are the main causes of excessive deficits in the EU countries. Moreover, the institutional constraints imposed after Maastricht over the EU countries’ fiscal policy have succeeded in reducing the probability of excessive deficits in Europe, especially in small countries. Therefore, this study concludes that supranational fiscal constraints, national efforts to reduce public debts, growth promoting policies and mechanisms to avoid political opportunism and partisan effects are essential factors for an EU country to avoid excessive deficits. Finally, the results presented in this paper raise the idea that a good strategy for the EU countries to avoid excessive deficits caused by the opportunistic behaviour of their policymakers would be to schedule elections for the beginning or the end of the year.
    Keywords: Excessive public deficits ; European Union ; Political opportunism ; Binary choice models
    JEL: E62 H6 O52
    Date: 2007
  4. By: Bertocchi, Graziella
    Abstract: We offer a rationale for the decision to extend the franchise to women within a politico-economic model where men are richer than women, women display a higher preference for public goods, and women’s disenfranchisement carries a societal cost. We first derive the tax rate chosen by the male median voter when women are disenfranchised. Next we show that, as industrialization raises the reward to mental labour relative to physical labour, women’s relative wage increases. When the cost of disenfranchisement becomes higher than the cost of the higher tax rate which applies under universal enfranchisement, the male median voter is better off extending the franchise to women. A consequent expansion of the size of government is only to be expected in societies with a relatively high cost of disenfranchisement. We empirically test the implications of the model over the 1870-1930 period. We proxy the gender wage gap with the level of per capita income and the cost of disenfranchisement with the presence of Catholicism, which is associated with a more traditional view of women’s role and thus a lower cost. The gender gap in the preferences for public goods is proxied by the availability of divorce, which implies marital instability and a more vulnerable economic position for women. Consistently with the model’s predictions, women suffrage is affected positively by per capita income and negatively by the presence of Catholicism and the availability of divorce, while women suffrage increases the size of government only in non-Catholic countries.
    Keywords: culture; divorce; family; inequality; public goods; welfare state; women suffrage
    JEL: H50 J16 N40 O11 P16
    Date: 2007–07

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