nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒12‒07
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Alternation as a Restraint on Investing in Influence: Evidence from the Post-Communist Transition By Milanovic, Branko; Hoff, Karla; Horowitz, Shale
  2. Voting experiments: Bandwagon voting or false-consensus effect? By Ivo Bischoff; Henrik Egbert
  3. Storable Votes and Agenda Order Control Theories and Experiments By Alessandra Casella
  4. Business and politics: how political beliefs influence volume and performance of leveraged buyouts By Gottschalg, Oliver
  5. Social choice on complex objects: A geometric approach By Luigi Marengo; Simona Settepanella
  6. Intertwined Federalism: Accountability Problems under Partial Decentralization By Marcelin Joanis
  7. Democracy, openness and jumps in growth By Gabriele Deana; Andrea Gamba
  8. Closing the 49th Parallel: An Unexplored Episode in Canadian Economic and Political History By James B. Davies; Stanley L. Winer
  9. Inequality and Cost of Electoral Campaigns in Latin America By Bugarin, Maurício; Portugal, Adriana; Sakurai, Sérgio

  1. By: Milanovic, Branko; Hoff, Karla; Horowitz, Shale
    Abstract: We develop and implement a method for measuring the frequency of changes in power among distinct leaders and ideologically distinct parties that is comparable across political systems. We find that more frequent alternation in power is associated with the emergence of better governance in postcommunist countries. The results are consistent with the hypothesis that firms seek durable protection from the state, which implies that expected political alternation is relevant to the decision whether to invest in influence with the governing party or, alternatively, to demand institutions that apply predictable rules, with equality of treatment, regardless of the party in power.
    Keywords: Governance; transition; political alternation
    JEL: P37 P3
    Date: 2008–08–30
  2. By: Ivo Bischoff (Justus-Liebig-University Gießen, Department of Economics); Henrik Egbert (Justus-Liebig-University Gießen, Department of Economics)
    Abstract: In an experiment designed to test for expressive voting, Tyran (JPubEc 2004) found a strong positive correlation between the participants’ approval for a proposal to donate money for charity and their expected approval rate for fellow voters. This phenomenon can be due to bandwagon voting or a false consensus effect. The social science literature reports both effects for voting decisions. Replicating Tyran’s experiment and adding new treatments, we provide evidence for a false consensus effect but find no support for bandwagon voting.
    Keywords: voting, experiments, bandwagon voting, false consensus effect
    JEL: C90 D72
    Date: 2008
  3. By: Alessandra Casella (Columbia University - Department of Economics)
    Abstract: The paper studies a voting scheme where members of a committee voting sequentially on a known series of binary proposals are each granted a single extra bonus vote to cast as desired - a streamlined version of Storable Votes. When the order of the agenda is exogenous, a simple sufficient condition guarantees the existence of welfare gains, relative to simple majority voting. But if one of the voters controls the order of the agenda, does the scheme become less efficient? The endogeneity of the agenda gives rise to a cheap talk game, where the chair can use the order of proposals to transmit information about his priorities. The game has multiple equilibria, differing systematically in the precision of the information transmitted. The chair can indeed benefit, but the aggregate welfare e¡èects are of ambiguous sign and very small in all parameterizations studied. The theoretical conclusions are tested through laboratory experiments. Subjects have difficulty identifying the informative strategies, and tend to cast the bonus vote on their highest intensity proposal. As a result, realized payoffs are effectively identical to what they would be if the agenda were exogenous. The bonus vote matters; the chair's control of the agenda does not.
    Date: 2008
  4. By: Gottschalg, Oliver
    Abstract: This paper explores the relationship between dominant local political views and the volume and performance of leveraged buyout investments.
    Keywords: political belief; leverage buyouts
    JEL: E61 G11
    Date: 2008–01–01
  5. By: Luigi Marengo; Simona Settepanella
    Abstract: Marengo and Pasquali (2008) present a model of object construction in majority voting and show that, in general, by appropriate changes of such bundles, different social outcomes may be obtained. In this paper we extend and generalize this approach by providing a geometric model of individual preferences and social aggregation based on hyperplanes and their arrangements. As an application of this model we give a necessary condition for existence of a local social optimum. Moreover we address the question if a social decision rule depends also upon the number of voting agents. More precisely: are there social decision rules that can be obtained by an odd (even) number of voting agent which cannot be obtained by only three (two) voting agent? The answer is negative. Indeed three (or two) voting agent can produce all possible social decision rules.
    Keywords: Social choice; object construction power; agenda power; intransitive cycles; arrangements; graph theory.
    JEL: D71 D72
  6. By: Marcelin Joanis (Université de Sherbrooke, GREDI and CIRANO)
    Abstract: Decentralization of expenditure responsibilities from central to local governments is generally thought to increase overall government accountability by bringing the policymaking process closer to citizens. In practice, decentralization reforms tend to be partial in nature, leading to the coexistence of multiple tiers of government in public good provision. Electoral accountability in such a context presents voters with the complex task of assessing the respective role of each level of government in the policy outcomes that they observe. This paper analyses the effects of such partial decentralization on accountability using a two-period political agency model, in which two levels of government are involved in public good provision and voters are imperfectly informed about each government’s contribution to the public good. The model predicts that a departure from complete centralization (or decentralization) will, in general, have ambiguous consequences for voter welfare, the benefits associated with the vertical complementarity among governments being weighed against the loss of accountability following from imperfect information and detrimental vertical interactions among levels of government.
    Keywords: decentralization, accountability, shared responsibility, federalism, vertical interactions
    Date: 2008
  7. By: Gabriele Deana (Bocconi University and University of Milan - Italy); Andrea Gamba (CESPRI Bocconi University, Milan - Italy)
    Abstract: We identify multiple structural breaks in a growth series using the econometric method developed by Bai and Perron (1998, 2003). We then regress the indicator of detected positive and negative breaks on three kinds of explanatory variables: external shocks, institutions and policies. Our results show that a change towards democratization fosters booms. Economic liberalizations act as an insurance against the probability of incurring into a crisis, while moves towards autarky undermine the chances of experiencing booms. We employ program evaluation to isolate single reforms and to assess the importance of reform sequencing: we find that democratization is a driver for growth and subsequent liberalization ensures stability.
    Keywords: political liberalization, democracy, economic reform, long-run economic growth
    JEL: O11 O43 E65
    Date: 2008–07
  8. By: James B. Davies (University of Western Ontario); Stanley L. Winer (Carleton University)
    Abstract: We draw attention to, and begin to consider the implications of the severe restrictions on emigration by Canadians to the United States introduced under the U.S. Immigration Act of 1965. These restrictions came into effect in 1968 and lasted until mobility began to increase under the free trade agreements in the early 1990's. This is an unusual episode in Canadian history, one whose implications for public policy have received little attention. The near closing of the border during this period likely led to a decrease in the elasticity of labour supply in Canada. We derive the implications of such a change in a competitive political model where the political costs and benefits of levying taxes on different activities are distinguished. Increased reliance on, and changes in the structure of, labour income taxes, and an increase in the size of the public sector are predicted. We show that these predictions are consistent with what occurred over the two decades after the near closing of the U.S. border.
    Date: 2008
  9. By: Bugarin, Maurício; Portugal, Adriana; Sakurai, Sérgio
    Date: 2008–10

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