nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒10‒13
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The political economy of public spending composition: evidence from a panel of OECD countries By Maria Manuel Pinho
  2. Voters’ dissatisfaction, abstention and entropy: analysis in European countries By Paulo Ferreira; Andreia Dionisio
  3. A note on the U-shaped relationship between political competition and economic freedom By Antonio Saravia
  4. The Farm, the City, and the Emergence of Social Security By Caucutt, Elizabeth M.; Cooley, Thomas F.; Guner, Nezih
  5. A Second Chance at Success: A Political Economy Perspective By Ryo Arawatari; Tetsuo Ono
  6. Effects of social norms and fractionalization on voting behavior in Japan By yamamura, eiji
  7. The Political Economy of Cultural Spending: Evidence from Italian Cities By Chiara Dalle Nogare; Matteo M Galizzi
  8. Ideology and Competence in Alternative Electoral Systems By Matias Iaryczower; Andrea Mattozzi
  9. Economic role of public administration in Central Asia: Decentralization and hybrid political regime By Libman, Alexander
  10. Strategic Voting in Sequential Committees By Matias Iaryczower
  11. Gender inequality and female political participation in Great Britain By Di Bartolomeo Anna
  12. ‘Living’ wage, class conflict and ethnic strife By Indraneel Dasgupta
  13. Segregation and the Quality of Government in a Cross-Section of Countries By Alberto Alesina; Ekaterina Zhuravskaya
  14. Social Capital and Relative Income Concerns: Evidence from 26 Countries By Justina Fischer; Benno Torgler
  15. The Elite and the Marginalised: An Analysis of Public Spending on Mass Education in the Indian States By Pal, Sarmistha; Ghosh, Sugata

  1. By: Maria Manuel Pinho (CEMPRE and Faculdade de Economia, Universidade do Porto)
    Abstract: We evaluate the influence of political and institutional features in public spending and its functional composition, by focussing on political actors’ preferences, both opportunistic and partisan, as well as on institutional arrangements as political fragmentation, the electoral system and the political regime. We use a dataset covering 23 OECD countries from 1970 to 2004. Empirical evidence supports the opportunistic approach in the sense that governments tend to engage in fiscal policy manipulation in order to win the next parliamentary election. This pre-electoral manipulation seems to be stronger in new democracies and under center and left-wing governments. There is, however, no evidence of pure partisan behavior. Furthermore, political fragmentation, with regard to both the government and the parliament, seems to favor fiscal indiscipline, particularly on social items.
    Keywords: public spending; functional composition; political economy
    JEL: D72 H5
    Date: 2008–10
  2. By: Paulo Ferreira (Universidade de Evora, CEFAGE-UE); Andreia Dionisio (Universidade de Evora, CEFAGE-UE)
    Abstract: This paper intends to explore the utilization of entropy through politics and election results, an area just slightly explored. It generalizes the interpretation of entropy, considering it a measure of dissatisfaction and disillusion of populations in relation to politics. Some phenomena like the increase of abstention in a country, consequence of the dissatisfaction of population and of their alienation in relation to politics could be detected and analysed. This discontentment could result, for example, in the appearance of new political parties, with more division of votes and increasing entropy (result of the discontentment and uncertainty by electors). Absolute majorities, while imply less dispersion of votes, are synonym of more confidence in a given party, making a reduction of entropy.
    Keywords: Entropy;Electoral Results; Satisfaction and Dissatisfaction of Population.
    JEL: C19 D72
    Date: 2008
  3. By: Antonio Saravia (American University of Sharjah, United Arab Emirates)
    Abstract: We investigate a recent political theory of institutional change according to which institutions of economic freedom are more likely to be adopted at the extreme cases of strong and weak political competition than at cases in between. We find that such a U-shaped relationship is verified when controlling for other political variables and past economic growth, but disappears when controlling for the initial level of development. In this case, the relationship between political competition and the adoption of institutions of economic freedom appears to be positive and linear as suggested by the political principal-agent paradigm.
    Keywords: Economic Freedom, Institutional Change, Political Competition, Political Institutions
    JEL: D72 H11 O57 P16
    Date: 2008–10
  4. By: Caucutt, Elizabeth M. (University of Western Ontario); Cooley, Thomas F. (New York University); Guner, Nezih (Universidad Carlos III, Madrid)
    Abstract: In this paper we study the social, demographic and economic origins of social security. The data for the U.S. and for a cross section of countries make it clear that urbanization and industrialization are strongly associated with the rise of social insurance. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax. In the model social security emerges and is sustained over time as a political and economic equilibrium. Modeling the political economy of social security within a model of structural change leads to a rich economic environment in which the median voter is identified by both age and location.
    Keywords: social security, political economy, structural change, migration
    JEL: H55 H3 D72
    Date: 2008–09
  5. By: Ryo Arawatari (Graduate School of Economics, Osaka University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper characterizes a stationary Markov-perfect political equilibrium where agents vote over income taxation that distorts educational investment. Agents become rich or poor through educational investment, and the poor have a second chance at success. The results show the following concerning the cost of a second chance. First, when the cost is low, the economy is characterized by high levels of upward mobility and inequality, and a low tax burden supported by the poor with prospects for upward mobility. Second, when the cost is high, there are multiple equilibria with various patterns of upward mobility, inequality and redistribution. Numerical examples show that the shift from a high-cost economy to a low-cost economy may reduce social welfare.
    Keywords: Second chance; Political economy; Inequality; Upward mobility; Intragenerational mobility.
    JEL: D30 D72 H55
    Date: 2008–01
  6. By: yamamura, eiji
    Abstract: This paper uses prefecture-level panel data from Japan, spanning the period 1989–2003, to examine the influence of social norms and fractionalization on voting behavior. The key findings obtained from analysis via the fixed effects estimation, which controls for unobserved prefecture-specific fixed effects, are as follows: (1) the voter turnout is higher in close-knit communities, indicating that social norms enhance voting; (2) fractionalization, from both economic and generational standpoints, lowers the voter turnout; and (3) a lack of social capital can lead to the distribution of votes being spread thinly among the competing parties.
    Keywords: Voter turnout ・ Distribution of votes ・ Social norms ・ Fractionalization
    JEL: D70 D72 Z13
    Date: 2008–05–25
  7. By: Chiara Dalle Nogare; Matteo M Galizzi
    Abstract: Political Economy and the Economics of Art and Cultural Heritage rarely have intersected. In this paper we investigate the relationship between Italian municipalities’ spending on culture in the 90s and 2000s and a number of political variables, such as a left/right dummy, an election year dummy and a term limit indicator, controlling, among others, for economic as well as socio-demographic characteristics of their population, level of human capital and instruction, proxies of social capital, extent of private financing of cultural provision, touristic and artistic relevance. We use panel data regression analysis and find that there are indeed some significant political determinants of local government cultural expenditure.
    Date: 2008
  8. By: Matias Iaryczower; Andrea Mattozzi
    Date: 2008–10–05
  9. By: Libman, Alexander
    Abstract: The aim of the paper is to understand how the organization of public administration in Central Asia shapes the results of economic development in the region. It discusses the main factors of bad quality of public administration in the region, paying particular attention to the link between political regimes and public administration. Moreover, it provides an overview of decentralization and devolution of power in Central Asian countries as one of the main channels of transformation of administration. The paper covers both formal decentralization and informal distribution of power between levels of government.
    Keywords: Public administration; hybrid regimes; decentralization
    JEL: D73 P26
    Date: 2008
  10. By: Matias Iaryczower
    Date: 2008–10–05
  11. By: Di Bartolomeo Anna
    Abstract: This paper aims to study the rationale of women’ political participation in Great Britain. In particular, we focus on the impact of family orientations about gender inequalities as people’s attitudes can often predict behavior patterns; we also consider other factors related to gender issues, e.g. employment status, job satisfaction and household structure. Specifically, by using the British Household Panel Survey, we evaluate the impact of these determinants on the transition of women from a politically active life to the abandon of it. We use panel data methodology by considering both fixed and random effect models and discriminate among them by the Hausman test. We found evidence that gender inequality-oriented women have a higher probability to abandon an active support to a political party than others; while women who declare “neutrality” in gender equality opinions tends to become more likely to be not political engaged than gender equality-oriented women.
    Date: 2008–09
  12. By: Indraneel Dasgupta
    Abstract: We examine how group-specific differences in reservation wage, arising due to asymmetries in social entitlements, impact on distribution via the joint determination of class conflict between workers and employers, and ‘ethnic’ conflict among workers. We model a two-dimensional contest, where two unions, representing different sections of workers, jointly but non-cooperatively invest resources against employers in enforcing an exogenously given rent, while also contesting one another. The rent arises from a ‘living’ wage, set above reservation wage rates via labour regulations. We show that high reservation wage workers gain, and employers lose, from better social entitlements for low reservation wage workers. The latter however benefit, with employers and against the former, from weak labour regulations. When minority/immigrant workers are marginalized both in the labour market and in non-wage entitlements, improving job access and expanding ‘social support’ has contradictory effects on class and ethnic conflicts. ‘Trade unionism’, i.e. political articulation of shared economic interests alone, appears insufficient to temper ethnic conflicts among workers.
    Keywords: Class conflict, Ethnic conflict, Living wage, Labour regulation, Social entitlement, Affirmative action, Distribution.
  13. By: Alberto Alesina (Harvard University); Ekaterina Zhuravskaya (CEFIR, NES)
    Abstract: This paper has three goals. The first, and perhaps the most important, is to provide a new compilation of data on ethnic, linguistic and religious composition at the sub-national level for a large number of countries. This data set allows us to measure segregation of di¤erent ethnic, religious and linguistic groups within the same country. The second goal is to correlate measures of segregation with measures of quality of the polity and policymaking. The third is to construct an instrument that helps to overcome the endogeneity problem that arises because groups move within country borders, partly in response to policies. Our results suggest that more ethnically and linguistically segregated countries, i.e., those where groups live more spatially separately, have a substantially lower quality of government. In contrast, we find no relationship between religious segregation and the quality of government.
    Date: 2008–07
  14. By: Justina Fischer; Benno Torgler
    Keywords: Research on the effects of positional concerns on individuals’ attitudes and behaviour is sorely lacking. Therefore, using the International Social Survey Programme 1998 data on 25’000 individuals from 26 countries this paper investigates the impact of relative income position on facets of social capital, covering horizontal and vertical trust as well as norm compliance. Testing relative deprivation theory, we identify a deleterious positional income effect for persons below the reference income, the absolute size of which far outweighs that of relative income advantage. In contrast, social capital rises in absolute income, while distributional fairness perceptions partially mediate relative income effects.
    Date: 2008
  15. By: Pal, Sarmistha (Brunel University); Ghosh, Sugata (Brunel University)
    Abstract: In the context of strikingly low literacy rates among Indian women and low caste population, the paper explores whether and how far the interests of the marginalized poor are undermined by the dominant elite consisting mainly of the landed and the capitalists. We distinguish the dominant elite from the minority elite (i.e., elected women and low caste representatives in the ruling government) and also the marginalised as measured by the state poverty rate. Results based on the Indian state-level data suggest that a higher share of land held by the top 5% of the population lowers public spending on education while presence of capitalist elite, as reflected in greater degree of industrialisation enhances it, even in poorer states; the landed elite thus appears to be unresponsive to the underlying poverty rate. The effect of minority representation in the government appears to have a limited impact, indicating a possibility of their non-accountability to serve their cohorts and/or a possible alliance with the dominant elite.
    Keywords: literacy among women and low caste, dominant landed and capitalist elite, minority elite, poor and the marginalised, education spending, development and non-development spending, India
    JEL: I28 J15 O15 P48
    Date: 2008–09

This nep-pol issue is ©2008 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.