nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒08‒21
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. ELECTORAL RULES AND POLITICIANS' BEHAVIOR: A MICRO TEST By Stefano Gagliarducci; Tommaso Nannicini; Paolo Naticchioni
  2. How does party fractionalization convey preferences for redistribution in parliamentary democracies? By Bruno Amable; Donatella Gatti; Elvire Guillaud
  3. Monetary Policy by Committee:Consensus, Chairman Dominance or Simple Majority? By RIBONI, Alessandro; RUGE-MURCIA, Francisco J.
  4. Dynamics and Stability of Constitutions, Coalitions, and Clubs By Daron Acemoglu; Georgy Egorov; Konstantin Sonin
  5. Capture of Anti-Poverty Programs: An Analysis of the National Rural Employment Guarantee Program in India By Raghbendra Jha; Sambit Bhattacharyya; Raghav Gaiha; Shylashri Shankar
  6. Why Warner-Lieberman Failed and How to Get America’s Working Families behind the Next Cap-and-Trade Bill By David Wheeler
  7. Preferences for redistribution: a European comparative analysis By Elvire Guillaud
  8. A Generalized Index of Fractionalization By BOSSERT, Walter; D’AMBROSIO, Conchita; LA FERRARA, Eliana
  9. Intra-Group Competition and Inter-Group Conflict: An Application to Northern Ireland By Colin Jennings
  10. Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies By Erin Marie Reid; Michael W. Toffel

  1. By: Stefano Gagliarducci; Tommaso Nannicini; Paolo Naticchioni (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Theory provides many explanations about the influence of electoral rules on politicians’ equilibrium behavior. With a few exceptions, all models agree that majoritarian elections are associated with more targeted redistribution and lower politicians’ rents than proportional representation. To sidestep the identification problems of previous empirical studies based on country-level data, we test these hypotheses using micro data for the mixed-member Italian House of Representatives. In particular, we address the nonrandom selection into different electoral systems by exploiting a particular feature of the Italian two-tier elections from 1994 to 2006: candidates could run for both the majoritarian and the proportional tier, but if they won in both tiers they had to accept the majoritarian seat. Focusing on elections decided by a narrow margin allows us to generate quasi-experimental estimates of the impact of the electoral rule. The main results confirm theoretical predictions, as majoritarian representatives put forward a higher proportion of bills targeted at local areas and show lower absenteeism rates than their proportional colleagues.
    Keywords: Electoral rule, politicians, targeted redistribution, rents, regression discontinuity design, treatment effect.
    JEL: D72 P16 C21
    Date: 2007–11
  2. By: Bruno Amable; Donatella Gatti; Elvire Guillaud
    Abstract: In this paper, we highlight the link between the political demand and social policy outcome while taking into account the design of the party system. The political demand is measured by individual preferences and the design of the party system is defined as the extent of party fractionalization. This is, to our knowledge, the first attempt in the literature to empirically link the political demand and the policy outcome with the help of a direct measure of preferences. Moreover, we account for an additional channel, so far neglected in the literature: The composition effect of the demand. Indeed, the heterogeneity of the demand within countries, more than the level of the demand itself, is shown to have a positive impact on welfare state generosity. This impact increases with the degree of fractionalization of the party system. We run regressions on a sample of 18 OECD countries over 23 years, carefully dealing with the issues raised by the use of time-series cross-section data.
    Date: 2008
  3. By: RIBONI, Alessandro; RUGE-MURCIA, Francisco J.
    Abstract: This paper studies the theoretical and empirical implications of monetary policy making by committee under three different voting protocols. The protocols are a consensus model, where super-majority is required for a policy change; an agenda-setting model, where the chairman controls the agenda; and a simple majority model, where policy is determined by the median member. These protocols give preeminence to different aspects of the actual decision making process and capture the observed heterogeneity in formal procedures across central banks. The models are estimated by Maximum Likehood using interest rate decisions by the committees of five central banks, namely the Bank of Canada, the Bank of England, the European Central Bank, the Swedish Riksbank, and the U.S. Federal Reserve. For all central banks, results indicate that the consensus model is statically superior to the alternative models. This suggests that despite institutionnal differences, committees share unwritten rules and informal procedures that deliver observationally equivalent policy decisions.
    Keywords: Committees, voting models, status-quo bias, median voter
    JEL: D7 E5
    Date: 2008
  4. By: Daron Acemoglu; Georgy Egorov; Konstantin Sonin
    Abstract: A central feature of dynamic collective decision-making is that the rules that govern the procedures for future decision-making and the distribution of political power across players are determined by current decisions. For example, current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations. We develop a general framework for the analysis of this class of dynamic problems. Under relatively natural acyclicity assumptions, we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness. We show how this framework can be applied in political economy, coalition formation, and the analysis of the dynamics of clubs. The explicit characterization we provide highlights two intuitive features of dynamic collective decision-making: (1) a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society; (2) efficiency-enhancing changes are often resisted because of further social changes that they will engender.
    JEL: C71 D71 D74
    Date: 2008–08
  5. By: Raghbendra Jha; Sambit Bhattacharyya; Raghav Gaiha; Shylashri Shankar
    Abstract: Using pooled household level data for the Indian states of Rajasthan and Andhra Pradesh we find that the size of landholdings is a negative predictor of participation in the National Rural Employment Guarantee Program (NREGP). In state level analysis this pattern survives in Rajasthan but reverses in Andhra Pradesh where we notice a positive relationship. This paper examines whether this sign reversal in Andhra Pradesh is indicative of program capture in Andhra Pradesh and better targeting in Rajasthan. We compare land inequality, political interference, and geographical remoteness across the two states and conclude that program capture may be an issue in Andhra Pradesh, largely because of these reasons. We also find evidence of complementarity between NREGP and the Public Distribution System (PDS).
    Keywords: Capture; Poverty; India
    JEL: I38 O12
    Date: 2008
  6. By: David Wheeler
    Abstract: Among partisans of greenhouse gas emissions regulation, the Senate’s failure to pass the Warner-Lieberman cap-and-trade bill is often attributed to rampant denial, fueled by diehard political conservatism, energy-company propaganda, and government suppression of evidence on global warming. If so, the solution to the problem is electoral change, exposure of the propaganda, and public education. However, public concern is already so widespread that even leaders of the Southern Baptist Convention have acknowledged the need for action. In this paper, I consider two additional forces that have stymied carbon emissions regulation in developing countries. The first is the perception that costly carbon regulation promoted by the rich will inflict an unjust burden on the poor. The second is hostility to taxation of critical fossil-fuel resources that were developed long before climate risk was identified. My econometric analysis suggests that these same forces have significantly affected senators’ votes on Warner-Lieberman. By implication, Congress is not likely to approve cap-and-trade legislation unless Americans with below-median incomes are compensated for expected losses. My analysis supports recent proposals for direct distribution of emissions permit auction revenues to American families on an equal per-capita basis.
    Keywords: climate change, global warming, economic development
    Date: 2008–07
  7. By: Elvire Guillaud
    Abstract: What explains people's preferences for state intervention in social policies? Conducting a cross-section analysis on individual-level survey data, we highlight the link between the economic position of agents and their specific demand toward redistribution. Controlling for a number of factors usually found to impact individual preferences in the literature, we take the egoistic motives for redistribution seriously and focus on the role played by the occupational status of individuals in shaping their preferences. Thus, (i) we estimate the relative importance of economic factors in terms of current and expected gain, allowing for social mobility experience and risk aversion. Further, (ii) we try to identify which socio-political groups could be formed on the basis of their preferences for redistribution. Finally, (iii) we highlight differences between European countries as it comes to the grouping of agents.
    Date: 2008
  8. By: BOSSERT, Walter; D’AMBROSIO, Conchita; LA FERRARA, Eliana
    Abstract: The goal of this paper is to contribute to the economic literature on ethnic and cultural diversity by proposing a new index that is informationally richer and more flexible than the commonly used ‘ethno-linguistic fractionalization’ (ELF) index. We characterize a measure of diversity among individuals that takes as a primitive the individuals, as opposed to ethnic groups, and uses information on the extent of similarity among them. Compared to existing indices, our measure does not require that individuals are pre-assigned to exogenously determined categories or groups. We show that our generalized index is a natural extension of ELF and is also simple to compute. We also provide an empirical illustration of how our index can be operationalized and what difference it makes as compared to the standard ELF index. This application pertains to the pattern of fractionalization in the United States.
    Keywords: Diversity, Similarity, Ethno-Linguistic Fractionalization.
    JEL: C43 D63
    Date: 2008
  9. By: Colin Jennings
    Abstract: This paper reviews four economic theories of leadership selection in conflictual settings. The first of these by Cukierman and Tomassi (1998) labeled the ‘information rationale’, argues that hawks may actually be necessary to initiate peace agreements. The second labeled the ‘bargaining rationale’ borrowing from Hamlin and Jennings (2007) agrees with the conventional wisdom that doves are more likely to secure peace, but post-conflict there are good reasons for hawks to be rationally selected. The third found in Jennings and Roelfsema (2008) is labeled the social psychological rationale. This captures the idea of a competition over which group can form the strongest identity, so can apply to group choices which do not impinge upon bargaining power. As in the bargaining rationale, dove selection can be predicted during conflict, but hawk selection post-conflict. Finally, the expressive rationale is discussed which predicts that regardless of the underlying structure of the game (informational, bargaining, psychological) the large group nature of decision-making by making individual decision makers non-decisive in determining the outcome of elections may cause them to make choices based primarily on emotions which may be invariant with the mode of group interaction, be it conflictual or peaceful. Finally, the paper analyses the extent to which the theories can throw light on Northern Ireland electoral history over the last 25 years.
    Keywords: conflict; strategic delegation; expressive choice; Northern Ireland
    JEL: D72 D74 H77
    Date: 2008–07
  10. By: Erin Marie Reid (Harvard Business School); Michael W. Toffel (Harvard Business School, Technology and Operations Management unit)
    Abstract: The challenges associated with climate change will require governments, citizens, and corporations to work collaboratively to reduce greenhouse gas emissions, a task that requires information on companies' emissions levels, risks, and reduction opportunities. This paper explores the conditions under which firms respond to shareholders' requests for this information. Building on previous theories of how social activists inspire field-level change, we hypothesize that shareholder actions and regulatory threats are likely to prime firms to cooperate with shareholder requests for information disclosure. Using a unique dataset, we find evidence of both direct and spillover effects. In the domain of private politics, shareholder resolutions filed against a firm, and against others in its industry, increase its propensity to acquiesce to these shareholder requests. Similarly, in the realm of public politics, the threat of state regulations that target a firm's industry, -as well as those that target other industries-increases the likelihood that the firm will acquiesce to shareholder requests to disclose related information. These findings extend existing theory by showing how organizational change can be sparked by both activist groups and government policymakers, and that challenges mounted against a single firm (and industry) can inspire field-level (and state-level) changes.
    Keywords: social movements theory, institutional change theory, private politics, activist shareholder resolutions, climate change, environmental sustainability
    Date: 2008–08

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