|
on Positive Political Economics |
| By: | John Duggan (Department of Political Science and Department of Economics University of Rochester); Cesar Martinelli (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)) |
| Abstract: | We formalize the concept of media slant as a relative emphasis on different issues of political interest by the media, and we illustrate the effects of the media choice of slant on political outcomes and economic decisions in a rational expectations model. In a two-candidate election, 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 off with media biased in favor of the underdog or the frontrunner depends 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 |
| URL: | http://d.repec.org/n?u=RePEc:cie:wpaper:0802&r=pol |
| By: | Carla Marchese; Marcello Montefiori |
| Abstract: | This paper considers the problem of voting about the quantity of a public good. An experiment has been run in order to test the extent of the strategic bias that arises in the individual vote when the social choice rule is to select the mean of the quantities voted for; conflicting theoretical predictions are available in the literature on this purpose. The political implications of the mean rule and its effects upon efficiency are also discussed. |
| Keywords: | experiment, voting rule, public good |
| JEL: | C91 D72 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:020&r=pol |
| By: | DeBacker, Jason |
| Abstract: | Models of electoral competition in which candidates can change position at no cost predict the convergence of platforms in a two-candidate election. Such convergence is at odds with empirical observation. In this paper, I undertake a study of candidate positioning in the United States Senate and determine the extent to which electoral costs associated with changing position explain the ideological positions taken by Senators. Using over 50 years of roll call voting data, I use a simulated method of moments approach to estimate a dynamic model of candidate positioning for U.S. Senators. The findings support a model in which Senators face convex costs to changing position, with the best fitting model being one with linear costs of adjustment. The model thus predicts severe punishments for “flip-flopping” Senators (those who make large changes in position). As a result of the significant costs associated with adjusting position, the empirical validity of the Median Voter Theorem (which depends upon candidates being able to change position at no cost) is called into question. |
| Keywords: | spatial models; dynamic political economy; Senate; ideology |
| JEL: | H11 D72 C01 |
| Date: | 2008–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8735&r=pol |
| By: | Salvador Barberà (Departament d'Economia i d'Historia Economica and CODE, Universitat Autonoma de Barcelona); Bernardo Moreno (Department of Economic Theory, Universidad de Málaga) |
| Abstract: | When the members of a voting body exhibit single peaked preferences, majority winners exist. Moreover, the median(s) of the preferred alternatives of voters is (are) indeed the majority (Condorcet) winner(s). This important result of Duncan Black (1958) has been crucial in the development of public economics and political economy, even if it only provides a sufficient condition. Yet, there are many examples in the literature of environments where voting equilibria exist and alternative versions of the median voter results are satisfied while single peakedness does not hold. Some of them correspond to instances where other relevant conditions, apparently not connected with single eakedness, are satisfied. For example preferences may satisfy the single-crossing property (Mirrlees, 1971, Gans and Smart, 1996, and Milgrom and Shannon, 1994), intermediateness (Grandmont, 1978) or order restriction (Rothstein, 1990). Still other interesting cases of existence of voting equilibria do not fall in any of these categories. We present a new and weak domain restriction which encompasses all the above mentioned ones, llows for new cases, still guarantees the existence of Condorcet winners and preserves a version of the median voter result. We illustrate how this new condition, that we call top monotonicity, arises naturally in different economic contexts. |
| Keywords: | Single peaked, single crossing and intermediate preferences, majority (Condorcet) winners |
| JEL: | D72 D71 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:mal:wpaper:2008-9&r=pol |
| By: | William Easterly; Shanker Satyanath; Daniel Berger |
| Abstract: | Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious. The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions. The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context. We thus develop a new panel dataset of superpower interventions during the Cold War. We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large. Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33%. Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship. |
| JEL: | O1 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13992&r=pol |
| By: | U. Witt; C. Schubert |
| Abstract: | In constitutional political economy, the citizens’ constitutional interests determine the social contract that is binding for the post-constitutional market game. However, following traditional preference subjectivism, it is left open what the constitutional interest are. Using the example of risk attitudes, we argue that this approach is too parsimonious with regard to the behavioral foundations to support a calculus of consent. In face of innovative activities with pecuniary and technological externalities in the post-constitutional phase, the citizens’ constitutional interests vary with their risk preferences. To determine what kind of social contract is generally agreeable, specific assumptions about risk preferences are needed. |
| Keywords: | constitutional preferences, social contract, original position, innovation, risk preferences Length 34 pages |
| JEL: | D72 H10 O33 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2008-03&r=pol |
| By: | Vincent Vicard (Centre d'Economie de la Sorbonne) |
| Abstract: | This paper investigates the determinants of the shape of regional trade agreements (RTAs). Because the world is constituted by independent political entities, international trade flows take place in a system where property rights are unsecured and RTAs should be understood as regulation mechanisms. In this theoretical framework, trade and security issues interact in the formation of RTAs, so that their determinants differ according to their level of political integration, defined by their ability to promote the negotiated settlement of conflicts. Empirical results confirm that countries more subject to interstate disputes and naturally more opened to trade are more likely to create politically integrated regional agreements, such as common markets or custom unions. On the contrary, international insecurity deters less integrated agreements implying a weak institutional framework, such as preferential or free trade agreements. |
| Keywords: | International conflicts, political integration, regionalism, trade, war. |
| JEL: | D74 F15 F51 F52 H56 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:bla08022&r=pol |
| By: | Felix Bierbrauer (Max Planck Institute for Research on Collective Goods, Bonn); Marco Sahm (University of Munich) |
| Abstract: | We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases. |
| Keywords: | Public goods, optimal taxation, two-dimensional heterogeneity, asymmetric information |
| JEL: | H41 D71 D72 D82 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2008_9&r=pol |
| By: | Portugal, Adriana C.; Bugarin, Maurício |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:ibm:ibmecp:wpe_100&r=pol |
| By: | Pedro Dal Bó; Andrew Foster; Louis Putterman |
| Abstract: | A novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. In contrast to the previous literature, our experimental design allows us to control for selection effects (e.g. those who choose the policy may be affected differently by it). Our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies. Our findings have implications for the generalizability of the results of randomized policy interventions. |
| JEL: | C10 C9 D7 O10 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13999&r=pol |
| By: | Elizabeth Asiedu (Department of Economics, The University of Kansas); James Freeman (Department of Economics, Wheaton College) |
| Abstract: | Many of the empirical studies that analyze the impact of corruption on investment have three common features: they employ aggregate (country-level) data on investment, corruption is measured at the country-level, and data for countries from several regions are pooled together. This paper uses firm-level data on investment and measures corruption at the firm and country-level, and allows the effect of corruption to vary by region. Our dependent variable is firms’ investment growth and we employ six measures of corruption from four different sources: two firm-level measures and four country-level measures. We find that the effect of corruption on investments varies significantly across regions: corruption has a negative and significant effect on investment growth for firms in Transition countries but has no significant impact for firms in Latin America and Sub-Saharan Africa. Furthermore, among the variables included in the regressions (firm size, firm ownership, trade orientation, industry, GDP growth, inflation and openness to trade) corruption is the most important determinant of investment growth for Transition countries. |
| Keywords: | Bribery, Corruption, Firm, Investment, Latin America and Caribbean, Sub-Saharan Africa, Transition Countries. |
| JEL: | G31 O16 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:200802&r=pol |
| By: | Weise, Charles L |
| Abstract: | The U.S. Great Inflation of the 1970s was characterized by repeated, failed attempts at disinflation by the Federal Reserve as well as periods of inaction despite rising inflation. Previous research has attributed these failures to policymakers’ “misperceptions” about monetary policy and the macroeconomy. This paper argues instead that the Fed’s behavior during this period can be explained as a response to political constraints. Members of the Fed understood that a serious attempt to tackle inflation would be unpopular with the public and would generate opposition from Congress and the Executive branch. The result was a commitment to the policy of gradualism, under which the Fed would attempt to reduce inflation with mild policies that would not trigger an outright recession, and premature abandonment of anti-inflation policies at the first sign of recession. The Fed managed to disinflate successfully under Chairman Volcker only when the political constraints on Fed policy were lifted after 1979, allowing the Fed to abandon the policy of gradualism and knowingly take actions that risked recession. Evidence for this explanation of Fed behavior is found in Minutes and Transcripts of FOMC meetings and speeches of Fed chairmen. |
| Keywords: | Great Inflation; monetary policy; Federal Reserve |
| JEL: | E58 E50 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8694&r=pol |