nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒12‒01
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. How Politics Influence State-owned Banks - the Case of German Savings Banks By Oliver Vins
  2. Proximity in coalition building By Julien Reynaud; Fabien Lange; Lukasz Gatarek; Christian Thimann
  3. Proportional power is free from paradoxes By László Á. Kóczy
  4. The Cultural Roots of Institutions By Mariko Klasing
  5. Oil and the duration of dictatorships By Jesus Crespo Cuaresma; Harald Oberhofer; Paul Raschky
  6. How corruption affects bank lending in Russia By Weill, Laurent
  7. The political economy under monetary union - has the euro made a difference? By Marcel Fratzscher; Livio Stracca
  8. Preference aggregation theory without acyclicity: The core without majority dissatisfaction By Kumabe, Masahiro; Mihara, H. Reiju
  9. Organized Labor and Political Change in Mexico By Jose Luis Velasco
  10. The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence By McEvoy, David M.; Murphy, James J.; Spraggon, John M.; Stranlund, John K.
  11. Transitory Economic Shocks and Civil Conflict By Antonio Ciccone

  1. By: Oliver Vins
    Abstract: This paper is one of the first to analyse political influence on state-owned savings banks in a developed country with an established financial market: Germany. Combining a large dataset with financial and operating figures of all 457 German savings banks from 1994 to 2006 and information on over 1,250 local elections during this period we investigate the change in business behavior around elections. We find strong indications for political influence: the probability that savings banks close branches, lay-off employees or engage in merger activities is significantly reduced around elections. At the same time they tend to increase their extraordinary spendings, which include support for social and cultural events in the area, on average by over 15%. Finally, we find that savings banks extend significantly more loans to their corporate and private customers in the run-up to an election. In further analyses, we show that the magnitude of political influence depends on bank specific, economical and political circumstances in the city or county: political influence seems to be facilitated by weak political majorities and profitable banks. Banks in economically weak areas seem to be less prone to political influence.
    JEL: D72 D78 G21 G28 H70
    Date: 2008–11
  2. By: Julien Reynaud (European Central Bank); Fabien Lange (Budapest Tech); Lukasz Gatarek (European Central Bank); Christian Thimann (European Central Bank)
    Abstract: Voting power methodology offers insights to understand coalition building in collective decision making. This paper proposes a new measure of voting power inspired from Banzhaf (1965) accounting for the proximity between voters by capturing how often they appear in winning coalitions together. Using this proximity index, we introduce a notion of relative linkages among coalition participants as determinant of coalition building. We propose an application to the governance structure of the International Monetary Fund, with linkages being represented by bilateral volumes of trade between voters. The results are able to explain several important features of the functioning of this particular voting body, and may be useful for other applications in international politics.
    Keywords: voting power index, coalition building, International Monetary Fund, linkage, proximity
    JEL: C71 F33
    Date: 2007
  3. By: László Á. Kóczy (Budapest Tech)
    Abstract: We modify the story behind the Shapley-Shubik power index and apply it to a legislative body. The resulting proportional index may be trivial, but is free from the paradoxical behaviour observable with standard power indices. The widespread use of this index may in fact be the reason for these \paradoxes".
    Keywords: a priori voting power, paradox of large size,paradox of new members, paradox of quarrelling members, Gamson's Law.
    JEL: C71 D72
    Date: 2008–05
  4. By: Mariko Klasing
    Abstract: Do political institutions have cultural roots? Using a novel data set of cultural values we show that culture, defined as a society's collective beliefs and values, is an important determinant of institutions. We argue that the traditional proxies for culture used in the existing literature suffer from conceptual problems and find that they do not survive several robustness checks. Our results suggest, that individualist societies and societies with preference for a more equal distribution of power set up institutions that better protect individual property rights, place more constraints on governments and have more effective governments. We find that our measures of culture are robust to the inclusion of other control variables and across different samples and that they always dominate the effects of the traditional proxies.
    Keywords: Institutions, political institutions, culture, cultural values
    JEL: D02 O17 P00 P51
    Date: 2008–11
  5. By: Jesus Crespo Cuaresma; Harald Oberhofer; Paul Raschky
    Abstract: This paper develops a simple model that analyses the relationship between a country’s oil endowment and the duration of its autocratic leader. The dictator uses the rents from oil extraction for both personal gain and to pay-off potential opposition and chooses an optimal level of oil exploitation. A group of kingmakers, on the other side, decides whether to stage a coup d’état and establish a new dictator. The relationship between oil endowment and the duration of the dictatorial regime is modulated by the price of oil. Applying an empirical survival model on data for the duration of 106 dictatorships supports the predictions of the theoretical model.
    Keywords: Natural resources, dictatorship, political economy, duration.
    JEL: Q34 D72 H11
  6. By: Weill, Laurent (BOFIT)
    Abstract: The aim of this study is to investigate the impact of corruption on bank lending in Russia. This issue is of major interest in order to understand the causes of financial underdevelopment and the effects of corruption in Russia. We use regional measures of corruption and bank-level data to perform this investigation. Our main estimations show that corruption hampers bank lending in Russia. We investigate whether this negative role of corruption is influenced by the degree of bank risk aversion, but find no effect. The detrimental effect of corruption is only observed for loans to households and firms, in opposition to loans to government. Additional controls confirm the detrimental impact of corruption on bank lending. Therefore, our results provide motivations to fight corruption to favor bank lending in Russia.
    Keywords: corruption; bank; Russia; financial development; economic transition
    JEL: G20 K40 P20
    Date: 2008–11–21
  7. By: Marcel Fratzscher (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Livio Stracca (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Economic and Monetary Union (EMU) has transformed Europe and has created an integrated pan-European economy. Much research has focused on understanding this integration process and what benefits and costs it entails. This paper identifies a political economy channel of EMU as the monetary union implies that member states had to transfer or at least curtail their policy autonomy in several areas, such as monetary policy and fiscal policy. The paper shows that EMU has helped reduce the impact of political shocks on the domestic economy of member states but magnified the transmission of political shocks within the euro area. Equally importantly, economies with a weaker track record in terms of economic and institutional quality exhibited a significantly higher sensitivity to domestic political shocks before EMU, but not thereafter. While this may entail that EMU has brought benefits to countries with a weaker economic and institutional stability by insulating them from adverse political developments at home, a potential drawback is that it may provide weaker market discipline for domestic political stability. JEL Classification: F31; F33; G14.
    Keywords: EMU, political economy, political news, monetary policy, fiscal policy, stock markets, transmission.
    Date: 2008–11
  8. By: Kumabe, Masahiro; Mihara, H. Reiju
    Abstract: Acyclicity of individual preferences is a minimal assumption in social choice theory. We replace that assumption by the direct assumption that preferences have maximal elements on a fixed agenda. We show that the core of a simple game is nonempty for all profiles of such preferences if and only if the number of alternatives in the agenda is less than the Nakamura number of the game. The same is true if we replace the core by the core without majority dissatisfaction, obtained by deleting from the agenda all the alternatives that are non-maximal for all players in a winning coalition. Unlike the core, the core without majority dissatisfaction depends only onthe players' sets of maximal elements and is included in the union of such sets. A result for an extended framework gives another sense in which the core without majority dissatisfaction behaves better than the core.
    Keywords: Core; Nakamura number; kappa number; simple games; voting games; maximal elements; acyclic preferences; limit ordinals
    JEL: D71 C71 C02
    Date: 2008–11–24
  9. By: Jose Luis Velasco (Universidad Nacional Autonoma de Mexico)
    Abstract: The problems of Mexican workers are obviously related to an international environment that is highly detrimental to traditional forms of labor organization and working conditions. Thus, the factors mentioned here should be understood as arising from the interaction between such an environment and the internal conditions of Mexico. The ideas summarized here may give a rather negative image of Mexican labor. In fact, it is not that workers have been uncourageous or indolent. But their bravery and energy have been largely confined to issues that are perhaps more fundamental and pressing: searching for jobs or creating their own jobs, keeping them, working hard, surviving. Similarly, the fact that labor has not played an active role in Mexico’s democratization does not mean that it has played no important role at all. But this role has been mostly passive. Without labor’s political restrain, the transition to a competitive regime perhaps would have never taken place. It is important to remember that a tacit but omnipresent condition put forward by the economic and social elite of the country is that political change must not alter the country’s socioeconomic structure.
    Date: 2008–08
  10. By: McEvoy, David M.; Murphy, James J.; Spraggon, John M.; Stranlund, John K.
    Abstract: This study examines the performance of stable cooperative coalitions that form to provide a public good when coalition members have the opportunity to not comply with their commitments. A stable coalition is one in which no member wishes to leave and no non-member wishes to join. To counteract the incentive to violate their commitments, coalition members fund a third-party enforcer. This leads to the theoretical conclusion that stable coalitions are larger (and provide more of a public good) when their members must finance enforcement relative to when compliance is ensured without the need for costly enforcement. However, our experiments reveal that giving coalition members the opportunity to violate their commitments while requiring them to finance enforcement to maintain compliance reduces the overall provision of the public good. The decrease in the provision of the public good is attributed to an increase in the participation threshold for a theoretically stable coalition to form and to significant levels of noncompliance. When we abandon the strict stability conditions and require all subjects to join a coalition for it to form, the average provision of the public good increases significantly.
    Keywords: stable coalitions, self-enforcing agreements, compliance, enforcement, public goods, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics, H41, C92,
    Date: 2008–07
  11. By: Antonio Ciccone
    Abstract: I examine whether civil conflict is triggered by transitory negative economic shocks. My approach follows Miguel, Satyanath, and Sergenti (2004) in using rainfall as an exogenous source of economic shocks in Sub-Saharan African countries. The main difference is that my empirical specifications take into account that rainfall shocks are transitory. Failure to do so may, for example, lead to the conclusion that civil conflict is more likely to break out following negative rainfall shocks when conflict is most probable following years with exceptionally high rainfall levels.
    Keywords: Transitory shocks, mean reversion, rainfall, conflict
    JEL: O0 P0 Q0
    Date: 2008–08

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