nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒04‒04
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Corruption and Political Competition By Damania, Richard; Yalcýn, Erkan
  2. Polls, Coalition Signals, and Strategic Voting: An Experimental Investigation of Perceptions and Effects By Meffert, Michael F.; Gschwend, Thomas
  3. Strategic Voting under Proportional Representation and Coalition Governments: A Simulation and Laboratory Experiment By Meffert, Michael F.; Gschwend, Thomas
  4. Voting for Coalitions? The Role of Coalition Preferences and Expectations in Voting Behavior By Meffert, Michael F.; Gschwend, Thomas
  5. Voting in Kenya: Putting Ethnicity in Perspective By Michael Bratton; Mwangi S. Kimenyi
  6. The Political Economy of Constitutional Choice: A Study of the 2005 Kenyan Constitutional Referendum By Mwangi S. Kimenyi; William F. Shughart II
  7. Corruption and Political Interest: Empirical Evidence at the Micro Level By Benno Torgler; Bin Dong
  8. A Theory of Military Dictatorships By Daron Acemoglu; Davide Ticchi; Andrea Vindigni
  9. Does Stringency of Gubernatorial Term Limits Matter? By Peter Calcagno; Monica Escaleras
  10. MPs for Sale? Estimating Returns to Office in Post-War British Politics By Eggers, Andy; Hainmueller, Jens
  11. Do Shareholders Vote Strategically? Voting Behavior, Proposal Screening, and Majority Rules By Maug, Ernst; Rydqvist, Kristian
  12. Viewing tax policy through party-colored glasses: What German politicians believe By Friedrich Heinemann; Eckhard Janeba
  13. Corruption and Human Development By Ngoc Anh Tran
  14. Bandwagon, underdog, and political competition: The uni-dimensional case By Woojin Lee
  15. Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance By Ferraz, Claudio; Finan, Frederico
  16. Manipulation in Elections with Uncertain Preferences By Andrew McLennan
  17. Ideology and competence in alternative electoral systems By Iaryczower, Matias; Mattozzi, Andrea
  18. The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning from Social Security Administration Monitoring By Radha Iyengar; Giovanni Mastrobuoni

  1. By: Damania, Richard; Yalcýn, Erkan
    Abstract: There is a growing evidence that political corruption is often closely associated with the rent seeking activities of special interest groups. This paper examines the nature of the interaction between the lobbying activities of special interest groups and the incidence of political corruption and determines whether electoral competition can eliminate political corruption. We obtain some striking results. Greater electoral competition serves to lessen policy distortions. However, this in turn stimulates more intense lobbying which increases the scope of corrupt behavior. It is shown that electoral competition merely serves to alter the type of corruption that eventuates, but cannot eliminate it.
    Keywords: Corruption, lobbying, political competition
    JEL: D72 D73
    Date: 2008
  2. By: Meffert, Michael F. (Sonderforschungsbereich 504); Gschwend, Thomas (Sonderforschungsbereich 504)
    Abstract: The paper investigates how poll information and coalition signals affect strategic voting, defined as casting a vote for a party other than the most preferred party to better influence the election outcome. In particular if the outcome of an election is perceived to be close, voters in multi-party systems with proportional representation and coalition governments should have an incentive to cast a vote for the party that best influences the formation of the next government. The study focuses in particular on voters’ attention to and perception of polls and coalition signals sent by parties before elections. The study used an innovative design that embedded a laboratory experiment in two real election campaigns, allowing the manipulation of poll results and coalition signals in a realistic environment. The findings suggest that political sophistication plays a crucial role for the accurate perception of polls and strategic voting. Coalition signals are found to have a surprisingly strong effect on (apparently) strategic voting.
    Date: 2007–09–26
  3. By: Meffert, Michael F. (Sonderforschungsbereich 504); Gschwend, Thomas (Sonderforschungsbereich 504)
    Abstract: The theory of strategic voting has been tested in experiments for elections in single member districts with three candidates or parties. It is unclear whether it can explain strategic voting behavior in a fairly common type of political system, multi-party systems with proportional representation, minimum vote thresholds, and coalition governments. In this paper, we develop a (non-formal) strategic voting game and show in a simulation that the model produces election scenarios and outcomes with desirable characteristics. We then test the decision-theoretic model in a laboratory experiment. Participants with a purely instrumental (financial) motivation voted in a series of 25 independent elections. The availability of polls and coalition signals by parties was manipulated. The results show that voters are frequently able to make optimal or strategic vote decisions, but that voters also rely on simple decision heuristics and are highly susceptible to coalition signals by parties.
    Date: 2007–07–30
  4. By: Meffert, Michael F. (Sonderforschungsbereich 504); Gschwend, Thomas (Sonderforschungsbereich 504)
    Abstract: Coalition governments are the norm in many countries, even though voters can only cast their vote for an individual party, not a specific coalition. Some voters might nevertheless cast their vote in a way that maximizes the probability that a preferred coalition will be formed after the election. In the paper, we investigate the effect of coalition preferences and expectations on vote decisions, above and beyond the preferences for specific parties. We focus in particular on voters’ ability to form differentiated expectations about possible coalitions, the likelihood of a majority and the likelihood that the parties will be able to agree on a coalition. We report the results of a nationally representative survey conducted before the 2006 Austrian General Election. We collected detailed information about respondents' party and coalition preferences and expectations about the electoral outcomes. Green Party voters are used to demonstrate that the effect of coalition preferences depends on whether or not voters expect a coalition to succeed.
    Date: 2007–10–23
  5. By: Michael Bratton (Michigan State University); Mwangi S. Kimenyi (University of Connecticut)
    Abstract: Do Kenyans vote according to ethnic identities or policy interests? Based on results from a national probability sample survey conducted in the first week of December 2007, this article shows that, while ethnic origins drive voting patterns, elections in Kenya amount to more than a mere ethnic census. We start by reviewing how Kenyans see themselves, which is mainly in non-ethnic terms. We then report on how they see others, whom they fear will organize politically along ethnic lines. People therefore vote defensively in ethnic blocs, but not exclusively. In Decem- ber 2007, they also took particular policy issues into account, including living standards, corruption and majimbo (federalism). We demonstrate that the relative weight that individuals grant to ethnic and policy voting depends in good part on how they define their group identities, with "ethnics" engaging in identity voting and "non-ethnics" giving more weight to interests and issues.
    Keywords: Democracy, Elections, Kenya, Ethnic Divisions, Ethnic Conflict.
    JEL: D72 D74 D78
    Date: 2008–03
  6. By: Mwangi S. Kimenyi (University of Connecticut); William F. Shughart II (University of Mississippi)
    Abstract: Recent studies of the linkages between the wealth of nations and the institutions of governance suggest that concentrating political power in a monarchy or a ruling coalition impedes economic growth and, moreover, that while power-diffusing reforms can enhance the wellbeing of society in general, opposition by groups benefitting from the status quo is predictable. In November 2005, Kenyans rejected a proposed constitution that, despite promises made by their new chief executive, would not have lessened the powers of the presidency. Using a unique, constituency-level dataset on the referendum vote, we estimate a model of the demand for power diffusion and find that ethnic groups' voting decisions are influenced by their expected gains and losses from constitutional change. The results also highlights the importance of ethnic divisions in hindering the power-diffusion process, and thus establish a channel through which ethnic fragmentation adversely impacts economic development.
    Keywords: Constitutions, Direct Democracy, Public Goods, Interest Groups, Ethnic Divisions.
    JEL: D72
    Date: 2008–03
  7. By: Benno Torgler; Bin Dong
    Abstract: The topic of corruption has recently attracted a great deal of attention, yet there is still a lack of micro level empirical evidence regarding the determinants of corruption. Furthermore, the present literature has not investigated the effects of political interest on corruption despite the interesting potential of this link. We address these deficiencies by analyzing a cross-section of individuals, using the World Values Survey. We explore the determinants of corruption through two dependent variables (perceived corruption and the justifiability of corruption). The impact of political interest on corruption is explored through three different proxies, presenting empirical evidence at both the cross-country level and the within-country level. The results of the multivariate analysis suggest that political interest has an impact on corruption controlling for a large number of factors.
    Keywords: Corruption; Political Interest, Social Norms
    JEL: K42 D72 O17 J24
    Date: 2008–03–17
  8. By: Daron Acemoglu; Davide Ticchi; Andrea Vindigni
    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 su¢ cient, 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 di¢ cult 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 e¤ects 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
  9. By: Peter Calcagno (Department of Economics and Finance, College of Charleston); Monica Escaleras (Department of Economics, Florida Atlantic University)
    Abstract: Political institutions within a society often serve to establish the rules governing the economic actions of members, help establish norms of appropriate economic behavior between the members, and ultimately help to explain the relative economic performance of the society. Institutional details like the role of budgetary constraints, party ideology, term limits, and voting methods have been analyzed with particular emphasis on the interplay of political and economic variables. Within this field, we believe that the study of term limits is of particular importance. Hence, this paper empirically investigates the link between the level of stringency of term limits and state expenditures after controlling for other characteristics of political institutions. Using panel data from 37 states in the U.S. between 1971 and 2000, the empirical results indicate that the stringency of term limits is an important factor in determining state expenditures.
    Keywords: State Expenditures, State government, Term Limits, Party Alternation
    JEL: D72 H72
    Date: 2007–07
  10. By: Eggers, Andy; Hainmueller, Jens
    Abstract: While the role of money in policymaking is a central question in political economy research, surprisingly little attention has been given to the rents politicians actually derive from politics. We use both matching and a regression discontinuity design to analyze an original dataset on the estates of recently deceased British politicians. We find that serving in Parliament roughly doubled the wealth at death of Conservative MPs but had no discernible effect on the wealth of Labour MPs. We argue that Conservative MPs profited from office in a lax regulatory environment by using their political positions to obtain outside work as directors, consultants, and lobbyists, both while in office and after retirement. Our results are consistent with anecdotal evidence on MPs' outside financial dealings but suggest that the magnitude of Conservatives' financial gains from office was larger than has been appreciated.
    Keywords: British Politics; returns to office; rents from office; political economy; money and politics; regression discontinuity
    JEL: D73 D72 P16
    Date: 2008–03–22
  11. By: Maug, Ernst (Chair for Corporate Finance, University of Mannheim and Sonderforschungsbereich 504); Rydqvist, Kristian (SUNY at Binghamton - School of Management)
    Abstract: We study shareholder voting on management proposals. We build on a simple model of strategic voting, provide structural estimates of its parameters, and derive testable implications. The evidence suggests that voting is strategic in the sense that shareholders take into account the information of other shareholders when making their voting decisions. We conclude that strategic voting prevents incorrect rejections of management proposals.
    Date: 2007–06–26
  12. By: Friedrich Heinemann (Centre for European Economic Research (ZEW)); Eckhard Janeba (University of Mannheim, CESifo)
    Abstract: The process of globalization has an important impact on national tax policies. Most of the literature does not focus directly on the political decision making process and assumes that the desired tax policy is responding to objective underlying tradeoffs. Based on an original survey of members of German national parliament (Bundestag) in 2006/7 we document a strong ideological bias among policy makers with respect to the perceived mobility of international tax bases (real capital and paper profits). Ideology via party affiliation influences also directly and indirectly the perceived national autonomy in tax setting and preferences for a EU minimum tax for companies. There seems little consensus as to what the efficiency costs of capital taxation in open economies are, even though our survey falls in a period of extensive debate about and actual adoption of a company tax reform bill in Germany. From a comparative politics perspective our results document the strong role of party discipline in a parliamentary democracy as the actual voting behaviour within a party is much more cohesive than the survey evidence suggests.
    Keywords: Globalization, business taxation, beliefs, member of parliament, profit shifting, party discipline, yardstick competition
    JEL: D78 D83 H25
    Date: 2008
  13. By: Ngoc Anh Tran (PhD student in Public Policy at Harvard University)
    Abstract: Today, corruption has been recognized as one of the hardest obstacles to international development. It is specially challenging as corruption and underdevelopment mutually reinforces one another, creating a vicious cycle that traps many developing nations. As numerous efforts around the world fail to move countries out of this trap, it has also been recognized that political will is an essential prerequisite for any anti-corruption reform to succeed. Sadly, political will rarely emerges from any corrupt system. A big question remaining open in the literature and practice is: where does political will come from?
    Keywords: Corruption trap, Human capital, Social capital, Information capital
    Date: 2008
  14. By: Woojin Lee (University of Massachusetts Amherst)
    Abstract: The present paper studies the Hotelling-Downs and Wittman-Roemer models of two-party competition when voter conformism is present and the policy space is uni-dimensional. We consider two types of voter conformism, bandwagon and underdog, and study their effects on the political equilibrium of the two models. Even if voter conformism is present, the Hotelling- Downs parties propose an identical policy at the equilibrium, which is equal to a strict Condorcet winner. Thus voter conformism, both bandwagon and underdog, has no effect on the Hotelling- Downs political equilibrium. In the Wittman-Roemer model, parties propose differentiated equilibrium policies, and the extent of such policy differentiation depends on the degree of voter conformism. In general, the stronger the bandwagon effect is, the more differentiated the equilibrium policies are. The opposite holds when the underdog effect is present; an increasing underdog effect mitigates the policy differentiation of the two parties, although the effect is not large. We also find multiple Wittman-Roemer equilibria when the bandwagon effect is sufficiently strong. JEL Categories: D3, D7, H2
    Keywords: bandwagon effect, underdog effect, Hotelling-Downs model, Wittman- Roemer model
    Date: 2008–03
  15. By: Ferraz, Claudio (Institute for Applied Economic Research (IPEA), Brazil); Finan, Frederico (University of California, Los Angeles)
    Abstract: Recent studies have emphasized the importance of the quality of politicians for good government and consequently economic performance. But if the quality of leadership matters, then understanding what motivates individuals to become politicians and perform competently in office becomes a central question. In this paper, we examine whether higher wages attract better quality politicians and improve political performance using exogenous variation in the salaries’ of local legislators across Brazil’s municipal governments. The analysis exploits discontinuities in wages across municipalities induced by a constitutional amendment defining caps on the salary of local legislatures according to municipal population. Our main findings show that increases in salaries not only attracts more candidates, but more educated ones. Elected officials are in turn more educated and stay in office longer. Higher salaries also increase legislative productivity as measured by the number of bills submitted and approved, and the provision of public goods.
    Keywords: politician salary, quality, political agency
    JEL: D72 D78 J33
    Date: 2008–03
  16. By: Andrew McLennan (School of Economics, The University of Queensland)
    Abstract: A decision scheme (Gibbard (1977)) is a function mapping profiles of strict preferences over a set of social alternatives to lotteries over the social alternatives. Motivated by conditions typically prevailing in elections with many voters, we say that a decision scheme is weakly strategy-proof if it is never possible for a voter to increase expected utility (for some vNM utility function consistent with her true preferences) by misrepresenting her preferences when her belief about the preferences of other voters is generated by a model in which the other voters are i.i.d. draws from a distribution over possible preferences. We show that if there are at least three alternatives, a decision scheme is necessarily a random dictatorship if it is weakly strategy-proof, never assigns positive probability to Pareto dominated alternatives, and is anonymous in the sense of being unaffected by permutations of the components of the profile. This result is established in two settings- a) a model with a fixed set of voters; b) the Poisson voting model of Meyerson (1998a,b, 2000, 2002).
    Date: 2008
  17. By: Iaryczower, Matias; Mattozzi, Andrea
    Date: 2008–03
  18. By: Radha Iyengar; Giovanni Mastrobuoni
    Abstract: The dramatic rise in the disability insurance (DI) roles in the last 20 years has been the subject of much controversy in both popular and academic circles. While, the relationship between DI and labor force participation has been the subject of a growing literature, the mechanism of this transition from employment to DI remains unclear. We hypothesize that one mechanism is the state-level adminis- tration of the program which creates a classic principal-agent problem. This paper analyzes the impact of continuing conflict of interests for Disability Determination Services agencies—between Social Security Administration standards and state gu- bernatorial political interests—interacted with the increased demand for disability insurance as an alternative for low-skilled works during the period of 1982 to 2000. We find evidence that multi-term governors allow a greater fraction of applicants than do first term governors. We then develop a model that illustrates how these differences can be due to the type of monitoring conducted by the Social Security Administration. We provide additional evidence supporting this hypothesis in the form of sub-group analysis by economic and political constraints. Overall, we find evidence that the monitoring system is counter-productive and encourages over-use of the disability insurance program to serve political ends.
    Keywords: Disability insurance, political economy, monitoring, gubernatorial, po- litical factors, allowance rate.
    JEL: H53 H55 I12
    Date: 2008

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