nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒03‒07
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Imperfect Information, Democracy, and Populism By Binswanger, J.; Prüfer, J.
  2. Federalism and Public Choice By Hills, Roderick
  3. International Labor Standards and the Political Economy of Child Labor Regulation By Doepke, Matthias; Zilibotti, Fabrizio
  4. Competition and Political Organization: Together or Alone in Lobbying for Trade Policy? By Matilde Bombardini; Francesco Trebbi
  5. A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900) By F. Javier San Julian Arrupe
  6. Coordination, focal points and voting in strategic situations: a natural experiment By Ganna Pogrebna; Pavlo Blavatskyy
  7. Partisan Control, Media Bias, and Viewer Responses: Evidence from Berlusconi's Italy By Ruben Durante; Brian Knight

  1. By: Binswanger, J.; Prüfer, J. (Tilburg University, Center for Economic Research)
    Abstract: The modern world is complex and difficult to understand for voters, who may hold beliefs that are at variance with reality. Politicians face incentives to pander to voters' beliefs to get reelected. We analyze the welfare effects of this pandering and show that it entails both costs and benefits. Moreover, we explore optimal constitutional design in the presence of imperfect information about how the world works. We compare indirect democracy to direct democracy and to delegation of policy making to independent agents. We find that indirect democracy is often welfare maximizing.
    Keywords: Imperfect information;beliefs;democracy;populism;accountabil- ity;experts.
    JEL: D72 D78 D83
    Date: 2009
  2. By: Hills, Roderick
    Abstract: This paper is a draft chapter for an edited collection on Law and Public Choice being published by Edward Elgar and edited by Dan Farber and Anne Joseph O’Connell. The chapter provides an overview of public choice literature regarding three aspects of federalism - exit-based normative justifications for federal regimes, voice-based normative justifications for federal regimes, and positive theories for how federal regimes are sustained through the political process. In general, I suggest that the most promising trend in public choice theory is the effort of economists, political scientists, and lawyers to tackle the thorny question of “voice” in federal regimes - that is, how subnational politics differs in federal regimes from the politics of unitary states. Moreover, the case for federalism based on exit critically depends on the argument for federalism based on improvement of ”voice.” Otherwise, migration from one city or state to another to escape predatory regimes would simply be pointless movement out of a ”Leviathan” frying pan into a ”Leviathan” fire. Public choice theorists seem to have an inveterate suspicion of claims that subnational government facilitates political participation, perhaps because the entire tradition of public choice is based on the theoretical impossibility that collective action can accurately represent individuals’ preferences and values. Yet nothing in the conventional account of how decentralization improves political ”voice” is inconsistent with the abstract principles of public choice theory.
    Keywords: Public Choice; federalism; political process; predatory regimes; Leviathan; collective action;
    JEL: H77 H7 A12 A10
    Date: 2009
  3. By: Doepke, Matthias; Zilibotti, Fabrizio
    Abstract: Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem.
    JEL: J20
    Date: 2009–03
  4. By: Matilde Bombardini; Francesco Trebbi
    Abstract: This paper employs a novel data set on lobbying expenditures to measure the degree of within-sector political organization and to explore the determinants of the mode of lobbying and political organization across U.S. industries. The data show that sectors characterized by a higher degree of competition (more substitutable products and a lower concentration of production) tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually. The paper proposes a theoretical model to interpret the empirical evidence. In an oligopolistic market, firms can benefit from an increase in their product-specific protection measure, if they can raise prices and profits. They find it less profitable to do so in a competitive market where attempts to raise prices are more likely to reduce profits. In competitive markets firms are therefore more likely to lobby together thereby simultaneously raising tariffs on all products in the sector.
    JEL: D7 F13 L13
    Date: 2009–03
  5. By: F. Javier San Julian Arrupe (Universitat de Barcelona)
    Abstract: The institutionalisation of political economy, this is, the processes through which political economy turned into a scholarly discipline, has become a field of increasing interest in the realm of the history of economic thought. The analysis of the evolution of these processes has been made through the study of the presence and significance of political economy in some key institutions, considered the pillars of the diffusion of economics in Western societies in the second half of the 19th century and first decades of the 20th: universities, economic associations, economic periodical publications and the national parliaments. This paper presents a comparison between the development of the process of institutionalisation of political economy in Spain and Italy, through the study of the presence of political economy in the aforementioned set of institutions in both countries in the period 1860-1900. Its aim is to assess the existence of a common path in the development of this process in both countries. This would be a starting point in order to test the existence of a model of institutionalisation of economics in this period.
    Keywords: parliament, italy, university, economic societies, institutionalisation, economic press, political economy, spain
    JEL: N23 N13 N01 B19
    Date: 2009
  6. By: Ganna Pogrebna; Pavlo Blavatskyy
    Abstract: This paper studies coordination in a multi-stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult British population. In the tournament, members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication. We find that in the early rounds of the tournament, contestants use a focal principle and coordinate on one of the multiple Nash equilibria in pure strategies by eliminating the weakest member of the team. However, in the later rounds, contestants switch to playing a mixed strategy Nash equilibrium.
    Keywords: Coordination, focal point, voting in strategic situations
    JEL: C72 C93 D72
    Date: 2009–02
  7. By: Ruben Durante; Brian Knight
    Abstract: This paper examines the impact of partisan control of the media on news content and viewership by consumers with differing ideologies. We use data from Italy, where the main private television network is owned by Silvio Berlusconi, the leader of the center-right coalition, and the public television corporation is largely controlled by the ruling coalition. Our first finding is that when, following the 2001 national elections, the control of the government switched from the center-left to the center-right, news content on public television shifted to the right. Second, we find evidence that viewers responded to these changes by modifying their choice of news programs. Right-leaning viewers increased their propensity to watch public channels which, even after the change, remained to the left of private channels. Furthermore, some left-wing viewers reacted by switching from the main public channel to another public channel that was controlled by the left during both periods. In line with these shifts in viewership, we also find evidence of an increase in trust in public television among right-wing viewers and a corresponding decrease among left-wing ones. Finally, we show that this behavioral response, which tended to shift ideological exposure to the left, significantly, though only partially, offset the movement of public news content to the right.
    JEL: D7 H0
    Date: 2009–03

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