nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒09‒13
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Attitude-Dependent Altruism, Turnout and Voting By Julio J. Rotemberg
  2. Democratic Errors By Christopher J. Ellis; John Fender
  3. Does Church Attendance Cause People to Vote? Using Blue Laws' Repeal to Estimate the Effect of Religiosity on Voter Turnout By Alan Gerber; Jonathan Gruber; Daniel M. Hungerman
  4. Elite Capture, Political Voice and Exclusion from Aid: An Experimental Study By D'Exelle, Ben; Riedl, Arno
  5. Persistent Ideology and the Determination of Public Policies over Time By Song, Zheng
  6. Political violence and economic growth By Bodea, Cristina; Elbadawi, Ibrahim A.
  7. It's the Media, Stupid - How Media Activity Shapes Public Spending By Bruns, Christian; Himmler, Oliver
  8. Corporate Campaign Contributions as a Predictor for Abnormal Stock Returns after Presidential Elections By Jürgen Huber; Michael Kirchler
  9. Nationalism and Government Effectiveness By Ahlerup, Pelle; Hansson, Gustav
  10. The Microfoundations of Community: Small Groups as Bridges and Barriers to Participatory Democracy By Islam, Gazi
  11. Public Spending Patterns: the regional allocation of public investment in Greece by political period. By Yannis Psycharis
  12. A Politico-Economic Analysis of the European Union’s R&D Policy By Chu, Angus C.
  13. Individual and country-level factors affecting support for foreign aid By Paxton, Pamela; Knack, Stephen

  1. By: Julio J. Rotemberg
    Abstract: This paper presents a goal-oriented model of political participation based on two psychological assumptions. The first is that people are more altruistic towards individuals that agree with them and the second is that people's well-being rises when other people share their personal opinions. The act of voting is then a source of vicarious utility because it raises the well-being of individuals that agree with the voter. Substantial equilibrium turnout emerges with nontrivial voting costs and modest altruism. The model can explain higher turnout in close elections as well as votes for third-party candidates with no prospect of victory. For certain parameters, these third party candidates lose votes to more popular candidates, a phenomenon often called strategic voting. For other parameters, the model predicts "vote-stealing" where the addition of a third candidate robs a viable major candidate of electoral support.
    JEL: D64 D72
    Date: 2008–09
  2. By: Christopher J. Ellis (University of Oregon); John Fender
    Abstract: In this paper we combine Acemoglu’s model of the economic origins of democracy with Lohmann’s model of political massprotest. This alllows us to provide ananalysis of the economic causes of political regimec hange based on the micro foundations of rebellion. We are able tod erive conditons under which democracy arises peacefully, when it occurs only after a violent rebellion, and when oligarchy persists. We model these posibilities in a world of asymmetric information where information cascades are possible, and where these cascades may involve errors in a paratian sense.
    Keywords: Democracy, Information Cascades, Rebellion
    JEL: H0 P4 P16
    Date: 2008–04–01
  3. By: Alan Gerber; Jonathan Gruber; Daniel M. Hungerman
    Abstract: Regular church attendance is strongly associated with a higher probability of voting. It is an open question as to whether this association, which has been confirmed in numerous surveys, is causal. We use the repeal of the laws restricting Sunday retail activity ("Blue laws") to measure the effects of church-going on political participation. The repeal of Blue Laws caused a 5 percent decrease in church attendance. We measure the effect of Blue Laws' repeal on political participation and find that following the repeal turnout falls by approximately 1 percentage point. This turnout decline, which is statistically significant and fairly robust across model specifications, is consistent with the large effect of church attendance on turnout reported in the literature, and suggests that church attendance may have significant causal influence on voter turnout.
    JEL: H1 J2
    Date: 2008–09
  4. By: D'Exelle, Ben (University of Antwerp); Riedl, Arno (Maastricht University)
    Abstract: We experimentally study the influence of local information conditions on elite capture and social exclusion in community-based development schemes with heterogeneous groups. Not only information on the distribution of aid resources through community-based schemes, but also information on who makes use of an available punishment mechanism through majority voting may be important. The main results are the following. First, many rich community representatives try to satisfy a political majority who would then abstain from using the punishment mechanism, and exclude those community members whose approval is then not required. The frequency of this exclusion strategy is highest with private information on the distribution and public voting. Second, when voting is public, responders are more reluctant to make use of the punishment mechanism, and representatives who follow the exclusion strategy are more inclined to exclude the poorest responder. Third, punishment is largely ineffective as it induces rich representatives to capture all economic resources. Fourth, if a poor agent takes the representative’s role, punishment rates drop, efficiency increases, and final distributions become more equal.
    Keywords: distribution of aid, inequality, social exclusion, laboratory experiment
    JEL: D72 C91
    Date: 2008–08
  5. By: Song, Zheng
    Abstract: This paper investigates how public policy responds to persistent ideological shifts in dynamic politico-economic equilibria. To this end, we develop a tractable model to analyze the dynamic interactions among public policy, individuals' intertemporal choice and the evolution of political constituency. Analytical solutions are obtained to characterize Markov perfect equilibria. Our main finding is that a right-wing ideology may increase the size of government. Data from a panel of 18 OECD countries confirm that after controlling for the partisan effect, there is a positive relationship between the right-wing political constituency and the government size. This is consistent with our theoretical prediction, but hard to explain by existing theories.
    JEL: E62 D72
    Date: 2008–03–08
  6. By: Bodea, Cristina; Elbadawi, Ibrahim A.
    Abstract: This paper analyzes the economic growth impact of organized political violence. First, the authors articulate the theoretical underpinnings of the growth impact of political violence in a popular model of growth under uncertainty. The authors show that, under plausible assumptions regarding attitudes toward risk, the overall effects of organized political violence are likely to be much higher than its direct capital destruction impact. Second, using a quantitative model of violence that distinguishes between three levels of political violence (riots, coups, and civil war), the authors use predicted probabilities of aggregate violence and its three manifestations to identify their growth effects in an encompassing growth model. Panel regressions suggest that organized political violence, especially civil war, significantly lowers long-term economic growth. Moreover, unlike most previous studies, the authors also find ethnic fractionalization to have a negative and direct effect on growth, though its effect is substantially ameliorated by the institutions specific to a non-factional partial democracy. Third, the results show that Sub-Saharan Africa has been disproportionately impacted by civil war, which explains a substantial share of its economic decline, including the widening income gap relative to East Asia. Civil wars have also been costly for Sub-Saharan Africa. For the case of Sudan, a typical large African country experiencing a long-duration conflict, the cost of war amounts to $46 billion (in 2000 fixed prices), which is roughly double the country's current stock of external debt. Fourth, the authors suggest that to break free from its conflict-underdevelopment trap, Africa needs to better manage its ethnic diversity. The way to do this would be to develop inclusive, non-factional democracy. A democratic but factional polity would not work, and would be only marginally better than an authoritarian regime.
    Keywords: Post Conflict Reconstruction,Population Policies,Hazard Risk Management,Post Conflict Reintegration,Social Conflict and Violence
    Date: 2008–08–01
  7. By: Bruns, Christian; Himmler, Oliver
    Abstract: Politicians seeking reelection need voters to know what they have done for them. Thus, incentives may arise to spend more money where media coverage is higher. We present a simple model to explain the allocation of public spending across jurisdictions contingent on media activity. An incumbent seeking to maximize the probability of reelection will shift more money to jurisdictions where an extra dollar gains more votes because a larger share of the electorate is informed about his policy. This prediction is tested using US data on county-level public spending, Designated Market Areas (DMAs) and location of licensed television stations. Instrumenting for the possible endogeneity of media activity to public spending, 2SLS results confirm a positive effect of media coverage on county-level public spending. Spatial regression rules out the possibility of confounding media effects with spatial autocorrelation.
    Keywords: public spending, information, television, elections
    JEL: D7 H7 D8
    Date: 2007–07
  8. By: Jürgen Huber; Michael Kirchler
    Abstract: In the U.S. campaign contributions by companies play a major role in financing election campaigns. We analyze contributions by companies before an election and stock market performance after the election for the presidential elections from 1992 until 2004. We find that (i) the percentage of contributions given to the winner in a presidential election and (ii) the total contribution (divided by market capitalization) have a significant positive impact on a company's stock market performance after an election, with the second factor being more important. Furthermore, we find that hypothetical portfolios of the 30 highest contributors according to (i) would have earned significant abnormal returns of up to 0.54% per month (6.6% p.a.) during the first year after an election. Investing in a portfolio formed according to (ii) would have yielded abnormal returns of up to 1.21% per month (15.5% p.a.) for the same observation period.
    Keywords: Presidential Election, Corporate Campaign Contributions, Abnormal Returns
    JEL: D72 G10 P16
    Date: 2008–09
  9. By: Ahlerup, Pelle (Department of Economics, School of Business, Economics and Law, Göteborg University); Hansson, Gustav (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The literature on nation-building and nationalism suggests that nation-building affects economic and political performance, mitigates the problems associated with ethnic hetero- geneity, but that nationalism, an indicator of successful nation-building, is linked to dismal performance via protectionism and intolerance. This paper shows that there is a nonlinear association between nationalism and government effectiveness, that nationalism leaves no imprint on the effects of ethnic heterogeneity but may be a positive force in former colonies, and that actual trade ows are independent of the level of nationalism in the population.
    Keywords: Nationalism; Nation-building; Ethnic Diversity; Government Effectiveness; Protectionism
    JEL: F52 N40
    Date: 2008–09–02
  10. By: Islam, Gazi
    Date: 2008–10
  11. By: Yannis Psycharis
    Abstract: The spatial dispersion of public investment constitutes one of the principal elements and also one of the key issues concerning a country’s strategic regional development. Public investment expenditure represents in part the ‘social wage’ citizens receive, while at the same time it generates external economies for the productive sectors of the economy. Using a dataset that includes total outlays by all central, regional and local authorities, this paper traces the distribution of public investment in Greek prefectures (NUTS 3) over the period 1976-2005. It seeks to highlight the spending pattern governments of that period had followed, to compare the changes (if any) between different periods, and to explain whether redistribution of national wealth or other factors, including political ones, could be contributing to explaining the pattern and its temporal changes.
    Keywords: Public investment, regional analysis, territorial public expenditure.
    Date: 2008–05
  12. By: Chu, Angus C.
    Abstract: This paper provides a politico-economic analysis of the European Union’s (EU) R&D policy. It develops an open-economy R&D-growth model characterized by two parameters that capture respectively the degree of technology spillover and the effectiveness of lobbying. In a non-cooperative equilibrium, each country chooses the level of R&D subsidy independently and fails to internalize technology spillover. Consequently, R&D subsidy is underprovided. In an economic union, the central government internalizes technology spillover but is vulnerable to lobbying by politicians from each country, who attempt to free-ride on the central government budget. Consequently, R&D subsidy is overprovided; however, this overprovision becomes less severe as the degree of technology spillover increases. Therefore, technology spillover has a surprisingly positive effect on welfare in an economic union. As for the effect on relative welfare, there is a cutoff value for the degree of technology spillover such that if and only if spillover is above this threshold, then an economic union dominates independent countries in welfare. Furthermore, this threshold is an increasing function in the effectiveness of lobbying. This paper also considers the possibility that the EU faces a binding budget ceiling. In this case, lobbying on R&D subsidy exerts a distortionary effect on revenue allocation, and hence a welfare loss continues to exist.
    Keywords: endogenous growth; policy coordination; lobbying; R&D subsidy
    JEL: O38 O41 D72
    Date: 2008–07
  13. By: Paxton, Pamela; Knack, Stephen
    Abstract: In recent years donor countries have committed to dramatic increases in the supply of foreign aid to developing countries. Meeting and sustaining such commitments will require sufficient support among donor country voters and taxpayers. The determinants of public opinion in donor countries on foreign aid have received little attention. This paper examines attitudes to foreign aid with a large, multi-level, cross-national study. It outlines a theoretical rationale for support for foreign aid, discussing the importance of both individual factors and economic and social structures. The theory is tested with multi-level models, including both individual-level and country-level variables to predict positive attitudes. Two datasets are used to measure attitudes in donor countries: (1) the 1995 World Values Survey has information from approximately 6,000 individuals in nine countries and asks a rich battery of questions at the individual-level, and (2) the 2002 Gallup"Voice of the People"survey asks fewer questions of individuals but includes 17 donor countries. Using both surveys combines their distinct strengths and allows tests of individual and national-level theories across disparate samples. The results generally support the predictions that attitudes toward aid are influenced by religiosity, beliefs about the causes of poverty, awareness of international affairs, and trust in people and institutions.
    Keywords: Post Conflict Reconstruction,Gender and Health,Development Economics&Aid Effectiveness,Foreign Aid,Disability
    Date: 2008–09–01

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