nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒01‒26
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Voting over Selective Immigration Policies with Immigration Aversion By Russo, Giuseppe
  2. Offshoring, economic insecurity, and the demand for social insurance By Richard G. Anderson; Charles S. Gascon
  3. Division of Labor, Economic Specialization and the Evolution of Social Stratification By J. Henrich; R. Boyd
  4. Federalism's Values and the Value of Federalism By Robert P. Inman
  5. The Role of Institutional Quality in a Currency Crisis Model By Yi Wu
  6. Federal Institutions and the Democratic Transition: Learning from South Africa By Robert P. Inman; Daniel L. Rubinfeld
  7. Do Walmartians Ruled? The political power of an emerging middle class in Mexico. By Hector J. Villarreal; Ricardo Cantú

  1. By: Russo, Giuseppe
    Abstract: The claim that "skilled immigration is welcome" is often associated to the increasing adoption of selective immigration policies. I study the voting over differentiated immigration policies in a two-country, three-factor general equilibrium model where there exist skilled and unskilled workers, migration decisions are endogenous, enforcing immigration restriction is costly, and natives dislike unskilled immigration. According to my findings, decisions over border closure are made to protect the median voter when her capital endowment is sufficiently small. Therefore I argue that the professed favour for skilled immigration veils the protection for the insiders. This result is confirmed by the observation that entry is rationed for both skilled and unskilled workers. Moreover, immigration aversion helps to explain the existence of entry barriers for unskilled workers in countries where the majority of voters is skilled.
    Keywords: Selective immigration policies; multidimensional voting; Condorcet winner.
    JEL: F22 D72 J18
    Date: 2008–01
  2. By: Richard G. Anderson; Charles S. Gascon
    Abstract: The fear of offshoring, particularly in services since 2000, has raised workers economic insecurity and heightened concerns over future economic globalization. Many have argued that globalization has exacerbated labor market turbulence increasing the demand for social insurance programs. The authors present a simple theoretical model establishing a connection between the threat of offshoring, economic insecurity, and the demand for social insurance. Data from the 1972-2006 General Social Survey to provides supporting empirical evidence.
    Keywords: Globalization ; International economic integration
    Date: 2008
  3. By: J. Henrich; R. Boyd
    Abstract: This paper presents a simple mathematical model that shows how economic inequality between social groups can arise and be maintained even when the only adaptive learning processes driving cultural evolution increases individual’s economic gains. The key assumption is that human populations are structured into groups, and that cultural learning is more likely to occur within groups than between groups. Then, if groups are sufficiently isolated and there are potential gains from specialization and exchange, stable stratification can sometimes result. This model predicts that stratification is favored, ceteris paribus, by (1) greater surplus production, (2) more equitable divisions of the surplus among specialists, (3) greater cultural isolation among subpopulations within a society, and (4) more weight given to economic success by cultural learners. We also analyze how competition among societies, both egalitarian societies and those with differing degrees of stratification, influences the long-run evolution of the institutional forms that support social stratification. In our discussion, we illustrate the model using two ethnographic cases, explore the relationships between our model and other existing approaches to social stratification within anthropology, and compare our model to the emergence of heritable divisions of labor in other species.
    Keywords: Length 43 pages
    Date: 2007–12
  4. By: Robert P. Inman
    Abstract: What is it about federal governance that makes it so attractive to economists, political philosophers, and legal scholars and is there any evidence that would suggest all this attention is warranted? Proponents see federalism as a means to more efficient public and private economies, as the foundation for increased political participation and democratic stability, and as important check on governmental abuses of personal rights and liberties. This study provides a working definition of federal governance and classifies a sample of 73 countries as either a constitutionally-based federal democracy, an administratively-based federal democracy, a unitary democracy, a federal dictatorship, or a unitary dictatorship. Governance is then related to eleven measures of economic, democratic, and rights performance. Three conclusions follow. First, decentralized policy-making does have a unique contribution to make to a society's ability to enforce property rights, to protect political and civil rights, and then because of such rights protections, to enhance private sector economic performance. Second, while policy decentralization is the key to federalism's strong rights and economic performance and can be achieved within a unitary government by fiat, constitutionally established provincial (or state) governments provide an extra and important protective barrier for policy decentralization. Federal institutions protect policy decentralization, and policy decentralization provides federalism's valued outcomes. Third, federalism needs democracy; there is no evidence that adding policy decentralization or provinces to a dictatorship significantly improves a dictatorship's economic or rights performance.
    JEL: H11 H77 P48
    Date: 2008–01
  5. By: Yi Wu
    Abstract: This paper is a theoretical study of the impact of institutional quality on currency crises from a public finance point of view. Recent empirical studies leave little doubt that weak institutions, including high levels of corruption, hinder economic performance. After the East Asian crisis, many observers have pointed to widespread corruption and crony capitalism as an underlying cause. Despite the popularity of the claim, there are only limited empirical and especially theoretical studies on the link between institutional quality and currency crises. This paper intends to fill in this void. We model institutional weakness as an inefficiency of the tax collection system. The model derived here shows that institutional weakness generally increases the likelihood of the existence of a self-fulfilling crisis equilibrium, and leads to larger currency devaluation when crises happen. However, this relationship could reverse when institutional weakness is very severe.
    Keywords: Financial crisis , Corruption , Tax collection , Tax systems ,
    Date: 2008–01–10
  6. By: Robert P. Inman; Daniel L. Rubinfeld
    Abstract: We present a model of a peaceful transition in South Africa from white, elite rule under apartheid to a multi-racial democracy. We ask how can the emerging majority credibly promise not to exploit the once ruling elite? Under South Africa’s "democratic federalism" the constitution creates an annual policy game where the new majority and the elite each control one policy instrument of importance to the other. The game has a stable, stationary democratic equilibrium that the elite prefer to autocratic rule. For the elite, the move to democracy means higher tax rates, but also higher economic growth; democracy is preferred to apartheid if the elite's rate of time preference is less than the transition's rate of return.
    JEL: H11 H77 P26
    Date: 2008–01
  7. By: Hector J. Villarreal; Ricardo Cantú
    Abstract: This paper questions if an increase in consumption of durable goods -such as electric appliances, associated in the media with an emerging middle class- could have aided the incumbent party to retain the Mexican presidency in 2006 -again, associated in the media with the backing of the economic model by voters. Important data limitations forced to employ indirect tests of these and to rely on correlations rather than causalities -with the associated identification problems. Nonetheless, it was not able to reject the hypothesis alluded. Though, in a tight election, a small effect could make the difference, and this analysis suggests that this very probably happened.
    Keywords: Mexico, Walmartians, middle-class, middle class, elections, 2006, durable goods, electric appliances
    JEL: D12 O54 C81 C10 C31 I30 I31
    Date: 2007–06

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