nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒03‒25
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. A Quantile-based Test of Protection for Sale Model By Susumu Imai; Hajime Katayama; Kala Krishna
  2. Is Protection Really for Sale? A Survey and Directions for Future Research By Susumu Imai; Hajime Katayama; Kala Krishna
  3. A Theory of Military Dictatorships By Acemoglu, Daron; Ticchi, Davide; Vindigni, Andrea
  4. Unequivocal Majority and Maskin-Monotonicity By Pablo Amoros
  5. War and Endogenous Democracy By Ticchi, Davide; Vindigni, Andrea
  6. Press Coverage and Political Accountability By James M. Snyder, Jr.; David Strömberg
  7. Decentralization, local government elections and voter turnout in Pakistan: By Akramov, Kamiljon T.; Qureshi, Sarfraz; Birner, Regina; Khan, Bilal Hasan
  8. Global Dynamics, Domestic Coalitions and a Reactive State: Major Policy Shifts in Post-War Turkish Economic Development By Ziya Önis; Fikret Senses
  9. Corruption and Innovation: A Grease or Sand relationship? By Prashanth Mahagaonkar
  10. Competition in Bureaucracy and Corruption By Mikhail Drugov
  11. Politics in Africa in 2006: Fewer Bullets, More Ballots? By Andrea Goldstein; Federica Marzo
  12. A Swing-State Theory of Trade Protection in the Electoral College By Mirabelle Muuls; Dimitra Petropoulou
  13. European Identity Formation in the Public Sphere and in Foreign Policy By Thomas Risse; Jana Katharina Grabowsky
  14. The power mapping tool: A method for the empirical research of power relations By Schiffer, Eva
  15. On the Political Economy of the Informal Sector and Income Redistribution By Hatipoglu, Ozan; Ozbek , Gulenay
  16. Media bias and electoral competition By Ascensión Andina-Díaz
  17. The Role of Media Slant in Elections and Economics By John Duggan; César Martinelli

  1. By: Susumu Imai; Hajime Katayama; Kala Krishna
    Abstract: This paper proposes a new test of the Protection for Sale (PFS) model by Grossman and Helpman (1994). Unlike existing methods in the literature, our approach does not require any data on political organizations. We formally show that the PFS model predicts that the quantile regression of the protection measure on the inverse import penetration ratio divided by the import demand elasticity, should yield a positive coefficient for quantiles close to one. We test this prediction using the data from Gawande and Bandyopadhyay (2000). The results do not provide any evidence favoring the PFS model.
    JEL: F13 F14
    Date: 2008–03
  2. By: Susumu Imai; Hajime Katayama; Kala Krishna
    Abstract: This paper critically and selectively surveys the literature on protection for sale and discusses directions for future research in this area. It suggests that the standard approach needs to be augmented to provide more compelling tests of this model.
    JEL: D72 F13 F17
    Date: 2008–03
  3. By: Acemoglu, Daron (MIT); Ticchi, Davide (University of Urbino); Vindigni, Andrea (Princeton University)
    Abstract: We investigate how nondemocratic regimes use the military and how this can lead to the emergence of military dictatorships. Nondemocratic regimes need the use of force in order to remain in power, but this creates a political moral hazard problem; a strong military may not simply work as an agent of the elite but may turn against them in order to create a regime more in line with their own objectives. The political moral hazard problem increases the cost of using repression in nondemocratic regimes and in particular, necessitates high wages and policy concessions to the military. When these concessions are not sufficient, the military can take action against a nondemocratic regime in order to create its own dictatorship. A more important consequence of the presence of a strong military is that once transition to democracy takes place, the military poses a coup threat against the nascent democratic regime until it is reformed. The anticipation that the military will be reformed in the future acts as an additional motivation for the military to undertake coups against democratic governments. We show that greater inequality makes the use of the military in nondemocratic regimes more likely and also makes it more difficult for democracies to prevent military coups. In addition, greater inequality also makes it more likely that nondemocratic regimes are unable to solve the political moral hazard problem and thus creates another channel for the emergence of military dictatorships. We also show that greater natural resource rents make military coups against democracies more likely, but have ambiguous effects on the political equilibrium in nondemocracies (because with abundant natural resources, repression becomes more valuable to the elite, but also more expensive to maintain because of the more severe political moral hazard problem that natural resources induce). Finally, we discuss how the national defense role of the military interacts with its involvement in domestic politics.
    Keywords: coups, democracy, military, nondemocracy, political economy, political transitions
    JEL: H2 N10 N40 P16
    Date: 2008–03
  4. By: Pablo Amoros (Department of Economic Theory, Universidad de Málaga)
    Abstract: The unequivocal majority of a social choice rule F is the minimum number of agents that must agree on their best alternative in order to guarantee that this alternative is the only one prescribed by F. If the unequivocal majority of F is larger than the minimum possible value, then some of the alternatives prescribed by F are undesirable (there exists a different alternative which is the most preferred by more than 50% of the agents). Moreover, the larger the unequivocal majority of F, the worse these alternatives are (since the proportion of agents that prefer the same different alternative increases). We show that the smallest unequivocal majority compatible with Maskin-monotonicity is n-((n-1)/m), where n=3 is the number of agents and m=3 is the number of alternatives. This value represents no less than 66.6% of the population.
    Keywords: Maskin-monotonicity; Majority; Condorcet winner
    JEL: C70 D78
    Date: 2008–03
  5. By: Ticchi, Davide (University of Urbino); Vindigni, Andrea (Princeton University)
    Abstract: Many episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we offer a theory of political transitions which focuses on the impact of international conflicts on domestic political institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an effective military organization only if the conscripted citizens are willing to put effort in fighting wars, which in turn depends on the economic incentives that are provided to them. The need to provide such incentives implies that an oligarchy adopting a mass-army may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to provide an incentive-compatible redistribution, they may cope with the moral hazard problem of the citizens-soldiers only by relinquishing political power to them through the extension of franchise. This is because democracy always implements a highly redistributive fiscal policy, which makes fighting hard incentive-compatible for the citizens-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent oligarchy is in some sense intermediate. A very high external threat allows the elite to make credible commitments of future income redistribution in favor of the citizens, while a limited external threat makes optimal for the elite not making any (economic or political) concession to the masses. Some historical evidence consistent with our theory is also provided.
    Keywords: autocracy, democracy, wars, redistribution
    JEL: P16 H11
    Date: 2008–03
  6. By: James M. Snyder, Jr.; David Strömberg
    Abstract: In this paper we estimate the impact of press coverage on citizen knowledge, politicians' actions, and policy. We find that a poor fit between newspaper markets and political districts reduces press coverage of politics. We use variation in this fit due to redistricting to identify the effects of reduced coverage. Exploring the links in the causal chain of media effects -- voter information, politicians' actions and policy -- we find statistically significant and substantively important effects. Voters living in areas with less coverage of their U.S. House representative are less likely to recall their representative's name, and less able to describe and rate them. Congressmen who are less covered by the local press work less for their constituencies: they are less likely to stand witness before congressional hearings, to serve on constituency-oriented committees (perhaps), and to vote against the party line. Finally, this congressional behavior affects policy. Federal spending is lower in areas where there is less press coverage of the local members of congress.
    JEL: D72 H5 L82
    Date: 2008–03
  7. By: Akramov, Kamiljon T.; Qureshi, Sarfraz; Birner, Regina; Khan, Bilal Hasan
    Abstract: "Decentralization has the potential to improve the accountability of government and lead to a more efficient provision of public services. However, accountability requires broad groups of people to participate in local government. Thus, voter turnout at local government elections is an important component of government accountability. This study used survey data on the 2005 local government elections in Pakistan to analyze the impact of electoral mechanisms, the credibility of elections, and voters' socioeconomic characteristics on voter turnout. The rational-choice perspective is applied to develop the specifications of the empirical model. The empirical analysis is based on a series of standard and multilevel random-intercept logistic models. Our important findings reveal that (1) voter turnout is strongly associated with the personal and social gratifications people derive from voting; (2) the preference-matching ability of candidates for local government positions is marginal; and (3) the introduction of direct elections of the district nazims—a key position in local government—might improve electoral participation and thus create a precondition for better local government accountability. The findings also suggest that less educated people, farmers, and rural people are more likely to vote." Authors' Abstract
    Keywords: Decentralization, local government elections, political participation, voter turnout, Public service provision, Governance,
    Date: 2008
  8. By: Ziya Önis (Department of Economics, Koc University); Fikret Senses (Department of Economics, METU)
    Abstract: The main objective of this study is to propose an analytical framework to explain the major policy shifts that has characterized post-war Turkish economic development; divided into four phases, starting respectively in 1950, 1960, 1980, and 2001. Its main contribution is to incorporate external and internal factors into this framework within a broadly political economy perspective, attaching particular significance to the role of economic crises in moving from one phase to the other. While the role of external agents is identified as the main factor behind policy shifts, the role of domestic coalitions in support of policy regime in each phase is also recognized. Drawing attention to the role of state in the impressive recent growth of countries such as China, India, and Ireland, the paper argues that there is still room for the state taking on a developmental role. The paper recommends that Turkey follows a similar path by improving state capacity not only with respect to its regulatory role but also in more developmental spheres, encompassing its redistributive and transformative role on the basis of a domestically-determined industrialization strategy.
    Keywords: State capacity, policy transformations, crises, multilateral institutions, distributional conflicts, regulation
    JEL: F53 H7
    Date: 2007–09
  9. By: Prashanth Mahagaonkar (Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group)
    Abstract: This paper provides a firm-level empirical analysis on the ways in which corruption affects innovative activity. Particularly with respect to the African continent that is striving to reconcile with instability and poverty, this issue seems to be of utmost importance. Using a newly available dataset on African firms, it is shown that corruption has a negative effect on product innovation and organisational innovation. Corruption does not affect process innovation while it facilitates marketing innovation.
    Keywords: Corruption, Developing Economies, Product Innovation, Process Innovation, Organisational Innovation, marketing Innovation, Taxation
    JEL: D73 O14 O31 H11 H25
    Date: 2008–03–14
  10. By: Mikhail Drugov
    Abstract: This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms` investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided.
    Keywords: Corruption, Competition, Bureaucracy
    JEL: D73 K42
    Date: 2007
  11. By: Andrea Goldstein; Federica Marzo
    Abstract: The long-term decline in political instability continued in 2006 and armed conflicts, though still widespread, have diminished. Multiparty elections have taken place in several African countries and progress towards participative democracy is encouraging. Progress in economic governance is still insufficient, with corruption continuing to hamper socio-economic development.
    Date: 2007–05
  12. By: Mirabelle Muuls; Dimitra Petropoulou
    Abstract: This paper develops an infinite-horizon, political agency model with a continuum of political districts, in which incumbent politicians can improve their re-election probability by attracting swing voters in key states through strategic trade protection. A unique equilibrium is shown to exist where incumbents build a reputation of protectionism through their policy decisions. We show that strategic trade protection is more likely when protectionist swing voters have a lead over free-trade supports in states with relatively strong electoral competition that represent a larger proportion of Electoral College votes. US data is used to test the hypothesis that industrial concentration in swing and decisive states is an important determinant of trade protection of that industry. The empirical findings provide support for the theory and highlight an important, and previously overlooked, determinant of trade protection in the US Electoral College.
    Keywords: Political Economy, Elections, Electoral College, Swing States, Trade Policy
    JEL: D72 D78 F13 R12
    Date: 2007
  13. By: Thomas Risse; Jana Katharina Grabowsky
    Abstract: While in political debates identity is often considered as given, scholars of social sciences concentrate on the formation of new and particularly transnational identities. Insights from nationalism reveal mechanisms of identity formation but European integration has taken its own way. We introduce different concepts of identity formation on the European level arguing that multiple identities are common and may take different forms. To observe identity formation, it is not only useful to look at elite and mass surveys but also to consider the public sphere. Though media are predominantly national, different studies show that their coverage Europeanizes. We think that valuable empirical evidences of European identities can be gathered from comparative media analyses focusing on common European frames and references made to a European imagined community. These identity formation processes take place in different policy fields. We argue that foreign policy is particularly appropriate to witness identity narratives at work. In search for a role in world politics, the EU has to revisit its fundamental values thereby contributing to European identity formation.
    Keywords: CFSP/ESDP; Constitution for Europe; democracy; European identity; European public space; Europeanization; legitimacy
    Date: 2008–03–15
  14. By: Schiffer, Eva
    Abstract: "This paper presents an innovative participatory method to visualize, discuss and analyze the power of different actors in a given governance field. The Power Mapping Tool was first used to analyze the governance effects of Community-Based Natural Resource Management (CBNRM) in Namibia. This example is presented as a case study to show how the method works: The actors involved are represented by board game figures that are characterized through “range-of-action-cards” and put on wooden “power towers” to show their power in the governance field. The result is a three dimensional sketch that provides quantitative data and guides the qualitative discussion about reasons for and effects of the power of different actors. In the case of Namibian CBNRM Power Mapping helped to understand how power indeed had been devolved from the national to the local level. However, on the community level elite-capture was seen as a serious problem. In this research the Power Mapping Tool proved to be easy to use with a very diverse mix of interview partners and provided not only a wealth of data but also increased the interviewees' understanding of their own situation." from Authors' Abstract
    Keywords: Governance, Participatory methods, Decentralization, Natural resource management, Political power,
    Date: 2007
  15. By: Hatipoglu, Ozan; Ozbek , Gulenay
    Abstract: In this paper we analyze a general equilibrium model in which agents choose to be employed in formal or in the informal sector. The formal sector is taxed to provide income subsidies and the level of redistribution is determined endogenously through majority voting. We explore how the demand for redistribution determined by majority voting interacts with the incentive to work in the untaxed informal market. We also investigate how different levels of the informal sector wage can explain simultaneous changes in the size of the informal sector and level of redistribution. The model is simulated to produce qualitative results to illustrate the differences between economies with different distributional features. The model accounts for the different sizes of informal sector and income redistribution in Mexico and United States.
    Keywords: Informal Sector; Income Redistribution; Median Voter
    JEL: H20 D3 J20
    Date: 2008–03–20
  16. By: Ascensión Andina-Díaz (Department of Economic Theory, Universidad de Málaga)
    Abstract: This paper examines the incentives of ideological media outlets to acquire costly information in a context of asymmetric information between political parties and voters. We consider two market structures: a monopoly media market and a duopoly one. We show that if each party has the support of a media, either party has the same probability of winning the election. However, if just one of the parties has the support of the media, the results might well change, as this party will get into office with a higher probability than the other party. We also analyze voters' welfare in this context and show that the important aspect is whether a media industry exists, and not the number of media outlets.
    Keywords: Election, Accountability, Media, Bias
    JEL: D72 D82
    Date: 2008–03
  17. By: John Duggan (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158); César Martinelli (Centro de Investigación Económica, Instituto Tecnológico Autónomo de México)
    Abstract: We formalize the concept of media slant as a relative emphasis on di¤erent issues of political interest by the media, and we illustrate the e¤ects of the media choice of slant on political outcomes and economic decisions in a rational expectations model. In a two-candidate elec- tion, if the media is biased in favor of the underdog, then it will put more emphasis on issues with a large electoral impact, hoping that the news will deliver an upset victory. Whether citizens are better o¤ with media biased in favor of the underdog or the frontrunner de- pends on the importance of choosing the .right.candidate for citizens versus the impact of political news on the private economic decisions of voters. Balanced media, giving each issue equal coverage, may be worse for voters than partisan media.
    Date: 2008–03

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