nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒04‒05
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic Voting and Multinomial Choice In US Presidential Elections By Myoung-jae Lee; Sung-jin Kang
  2. Political Cycles in Active Labor Market Policies By Mechtel, Mario; Potrafke, Niklas
  3. The Politics of Social Protection: Social Expenditure versus Markets’ Regulation By Debora Di Gioacchino; Laura Sabani
  4. Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access By Christopher Cotton
  5. The President and the Distribution of Federal Spending By Christopher R. Berry; Barry C. Burden; William G. Howell
  6. Efficiency of Fairness in Voting Systems By František Turnovec
  7. A Median Voter Model of the Vertical Fiscal Gap By Dahlby, Bev; Rodden, Jonathan; Wilson, Sam
  8. Access Fees in Politics By Christopher Cotton
  9. Vote-Buying and Reciprocity By Frederico Finan
  10. Too Many Municipalities? By Dahlby, Bev
  11. The Political Economy of the Green Technology Sector - A study about institutions, diffusion and efï¬ciency By Leo Wangler
  12. The Architecture of Federations: Constitutions, Bargaining, and Moral Hazard By Kessler, Anke; Luelfesmann, Christoph; Myers, Gordon M
  13. Stronger Bridges: Putting Congress and State Legislatures in Common Ideological Space By Boris Shor
  14. Voting on Punishment Systems Within a Heterogeneous Group By Noussair, C.N.; Tan, F.
  15. Political parties, two-level Governance and economic growth By Betty Agnani; Henry Arai Casanova
  16. Preferences for Redistribution By Alberto F. Alesina; Paola Giuliano

  1. By: Myoung-jae Lee (Department of Economics, Korea University, Seoul, South Korea); Sung-jin Kang (Department of Economics, Korea University, Seoul, South Korea)
    Abstract: Ross Perot was a relatively viable third party candidate in the 1992 US presidential election, but he was not any more in the 1996 election. This provides a good opportunity to analyze strategic voting behavior?voting for a candidate not most preferred by the voter?in the US presidential elections with panel data drawn from NES (National Election Studies). First, the 1992 election is analyzed with multinomial choice estimators. Second, using the estimates, each individual¡¯s choice is predicted for the 1996 election. Third, those who were predicted to vote for Perot in 1996 but did not are identified as strategic voters and their profile is drawn. In addition to the main task of analyzing the strategic voting behavior, this paper does two additional tasks. First, analyzing the 1992 data with multinomial choice estimators, t is found that the following variables mattered significantly for the US presidential election: respondent and candidate ideology, personal finance, age, education, income, sex, abortion stance, health insurance policy, and welfare program policy. Second, critical mistakes in the literature in applying multinomial probit to election data are pointed.
    Keywords: strategic voting, presidential election, multinomial logit, multinomial probit
    Date: 2009
  2. By: Mechtel, Mario; Potrafke, Niklas
    Abstract: This paper examines a framework in which politicians can decrease unemployment via active labor market policies (ALMP). We combine theoretical models on partisan and opportunistic cycles and assume that voters are ignorant of the necessary facts to make informed voting decisions. The model predicts that politicians have incentives for a strategic use of active labor market policies that leads to a political cycle in unemployment and budget deficit. We test the hypotheses predicted by the theoretical model using data from German states from 1985:1 to 2004:11. The results illustrate that opportunistic behavior of politicians can explain the development of ALMP approximated by job-creation schemes.
    Keywords: active labor market policies; political cycles; labor market expenditures; opportunistic politicians; partisan politicians
    JEL: J08 E62 H72 H61 P16
    Date: 2009
  3. By: Debora Di Gioacchino; Laura Sabani
    Abstract: Recently, it has been argued that the notion of a European social model is misleading and that there are in fact different European social models with different features and different performances in terms of efficiency and equity. In this paper, we look at the welfare state from a political economy point of view and interpret the different regimes as possible outcomes of a political process through which votersf heterogeneous preferences are aggregated. In our model, agents differ in two respects: income and socioeconomic vulnerability. Policy-makers must decide on two policies: a proportional income tax to finance a social transfer, providing equal benefits to all citizens, and a market regulation policy which benefits only vulnerable workers, providing them with additional protection against unemployment risk. Market regulation is inefficient since it decreases aggregate resources. Individualsf heterogeneity generates a conflict over policies. We feature the political process as a two-party electoral competition in a citizen-candidate model with probabilistic voting. We show that an inefficient equilibrium exists and this outcome is more likely the greater are income inequality and the proportion of vulnerable workers. Intuitively, greater inequality raises the level of redistributive spending desired by the poor, making, at the same time, the rich more adverse to the welfare state. In this framework, both the rich and the poor, in order to win the election and realize the fiscal gain, have an incentive to support market restrictions, in the attempt to capture the votes of the vulnerable minority, who benefit from these policies.
    Keywords: welfare state, social protection, market regulations, political process, political economy.
    JEL: D72 H53 L5 J65
    Date: 2009–01
  4. By: Christopher Cotton (Department of Economics, University of Miami)
    Abstract: This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.
    Keywords: Lobbying, campaign ï¬nance reform, political access, bid caps, verfiable information, evidence disclosure
    JEL: D72 D44 D82 D78
    Date: 2008–12
  5. By: Christopher R. Berry; Barry C. Burden; William G. Howell
    Abstract: Empirical research on distributive politics emphasizes party and committee leaders in Congress. This paper highlights the president, who most credibly fills the role of the proposer in Baron and Ferejohn’s (1989) seminal model, and who has further opportunities to influence the distribution of federal outlays both later in the appropriations process and after a final bill is enacted. We analyze a large database that tracks the geographic spending of nearly every domestic program over a 21-year period. Using a district fixed-effects estimation strategy, we find only sporadic evidence that committee chairs, party leaders, and majority party members receive larger shares of federal outlays. Instead, we find consistent and robust evidence that districts receive systematically more spending when they are represented by legislators in the president’s party.
    Keywords: political party, distribution, federal spending
    Date: 2009–02
  6. By: František Turnovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Fair representation of voters in a committee representing different voters’ groups is being broadly discussed during last few years. Assuming we know what the fair representation is, there exists a problem of optimal quota: given a “fair” distribution of voting weights, how to set up voting rule (quota) in such a way that distribution of relative a priori voting power is as close as possible to distribution of relative voting weights. Together with optimal quota problem a problem of trade-off between fairness and efficiency (ability of a voting body to change status quo) is formalized by a fairness-efficiency matrix.
    Keywords: Committee system, efficiency, fairness, fairness-efficiency matrix, indirect voting power, optimal quota, power indices, voting system
    JEL: C71 D72 H77
    Date: 2009–03
  7. By: Dahlby, Bev (University of Alberta, Department of Economics); Rodden, Jonathan (Stanford University); Wilson, Sam (University of Alberta, Department of Economics)
    Abstract: A median voter model is developed to explain the size of the vertical fiscal gap in a federation, i.e. the extent to which subnational governments' expenditures exceed their own-source tax revenues. In our model, individuals vote in subnational elections and in federal elections to determine tax rates and spending on public services by each level of government and transfers to the subnational governments. In the resulting political equilibrium, intergovernmental transfers from the central government are affected by the tax sensitivity of the tax bases of the central and subnational governments, the degree of inequality in the tax bases of the subnational governments, the allocation of spending responsibilities between the central and subnational governments, and whether the federal legislature is unicameral or bicameral.
    Keywords: intergovernmental grants; median voter model; fiscal federalism; vertical fiscal gap; vertical fiscal imbalance
    JEL: H71 H72 H77
    Date: 2009–01
  8. By: Christopher Cotton (Department of Economics, Cornell University)
    Abstract: This paper develops a game-theoretic model of lobbying in which a politician sells access to interest groups. The politician sets an access fee, or the minimum contribution necessary to secure access, and an interest group that pays this fee can share verifiable evidence in favor of its preferred policy. The more the politician knows about interest group evidence, the better able he is to identify and implement the welfare-maximizing policy. In equilibrium, a wealthy interest group must pay more for access than an otherwise similar poor group; and a group involved with an important issue must pay less than an otherwise similar group involved with a less-important issue. The politician sets higher-than-optimal access fees in order to increase contributions. A contribution limit can improve constituent welfare by lowering the price of access, which tends to result in a more-informed politician. However, a limit can also decrease the range of issues for which the politician is willing to sell access, thereby reducing politician information and constituent welfare. Although the optimal limit is binding for some issues, it is never optimal to ban contributions.
    Keywords: Lobbying, campaign contributions, contribution limits, political access, hard information, evidence disclosure
    JEL: D72 D78 D82
    Date: 2008–06–09
  9. By: Frederico Finan
    Abstract: In this paper, how social preferences overcome the commitment problems implicit in vote-buying is examined. Data used for the study is a survey information on vote-buying experienced in a 2006 municipal election in Paraguay, with information on behavior in experiments carried out in 2002. [Working Paper No. 214].
    Keywords: vote buying, elections, paraguay, data, reciprocity, politicians, politics, economists, economic behavior, social preferences, altruism,
    Date: 2009
  10. By: Dahlby, Bev (University of Alberta, Department of Economics)
    Abstract: Does democracy lead to the creation of too many municipalities? We analyze this issue within the context of the Alesina and Spolare (1996) model where the quality of municipal services deteriorates with the distance from the center of a municipality. Individuals can vote in a referendum to split an existing municipality. We show that social welfare will decline when municipalities are split if the level of the public service, as chosen by the median voter, is lower in the new smaller municipalities. In general, the model indicates that there may be a democratic bias in favour of creating too many municipalities.
    Keywords: median voter model; fiscal federalism; succession; municipal boundaries
    JEL: H71 H72 H77
    Date: 2009–02
  11. By: Leo Wangler (University of Jena, Germany)
    Abstract: This paper discusses aspects related to the green technology sector in Germany. In a ï¬rst step institutional reforms enabling diffusion of green technologies are analysed. Cost arguments are also taken into account. In a second step a theoretical model developed by Tanguay et al. (2004) is modiï¬ed in order to evaluate the efï¬ciency of the institutional setting in a political economy framework. The model is able to show that command and control policies (CCPs) are accompanied by cost-inefï¬ciencies depending on the political weight of the green technology sector. Because actual costs related to the support of green technologies are relatively low, the theoretical predictions of the model are moderated. Nevertheless, as additional money will be transferred to the green technology sector during the next decades, interest groups will gain additional political power and the problem of cost inefï¬ciency can therefore become more relevant. The paper gives important hints whether the CCP system installed in Germany is the right instrument in order to increase the share of energy produced with green technologies from 12.5% (in 2010) up to a level of 30% (in 2020).
    Keywords: Regulation, Renewable Energies, Green Technologies, EEG, SEG
    JEL: D72 H21 L52 Q28 Q48
    Date: 2009–03–25
  12. By: Kessler, Anke; Luelfesmann, Christoph; Myers, Gordon M
    Abstract: The paper studies a federal system where a region provides non-contractible essential inputs for the successful implementation of a local public policy project with spill-overs, and where bargaining between different levels of government may ensure efficient decision making ex post. We ask whether the authority over the public policy measure should rest with the local government or with the central government, allowing financial relationships within the federation to be designed optimally. Centralization is shown to dominate when governments are benevolent. With regionally biased governments, both centralization and decentralization are suboptimal as long as political bargaining does not take place. With bargaining, however, the first best can often be achieved under decentralization, but not under centralization. At the root of this result is the alignment of decision making over essential inputs and project size under decentralized governance.
    Keywords: Constitutions; Decentralization; Federalism; Grants; Political Bargaining
    JEL: D23 D78 H21 H77
    Date: 2009–03
  13. By: Boris Shor
    Abstract: In an earlier paper, I addressed the problem of putting state legislatures on a cross- institutional common space with Congress. I relied on new roll call data from these legislatures, and a bridging technique involving state legislators who served in Congress later in their careers. This bridging approach is inherently limited because the supply of those who “graduate" is inherently limited by state size, the incumbency advantage, and the limited extent of the state roll call data. I adopt a new approach, employing the Votesmart questionnaire administered to campaigning politicians every election year. The number of respondents and the broad range of questions asked allow me to treat respondents as bridge actors. I thus expand the number of states in common space immediately to 30 (from 9) [covering 89% of the US population], with the promise of nearly all 50 states very near. This new data allows me to answer important questions about polarization, policy output, and party strength.
    Keywords: votesmart, polarization, policy output, party strength
    Date: 2008–09
  14. By: Noussair, C.N.; Tan, F. (Tilburg University, Center for Economic Research)
    Abstract: We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The punishment system can condition on type and contribution history. The results indicate that the most effective regime, in terms of contributions and earnings, is one that allows punishment of low contributors only, regardless of productivity. Nevertheless, only a minority of sessions converge to this system, indicating a tendency for the voting process to lead to suboptimal institutional choice.
    Keywords: Voting;Punishment;Voluntary Contributions;Heterogeneity;Experiment
    JEL: C92 D74 H41
    Date: 2009
  15. By: Betty Agnani (Universidad de Granada); Henry Arai Casanova (Universidad de Granada)
    Abstract: Los profesores de la Universidad de Granada, Betty Agnani y Henry Aray Casanova, analizan en este Documento de Trabajo el efecto en el crecimiento económico de las regiones españolas a partir de las diferentes combinaciones de partidos políticos que gobiernan tanto a nivel central como regional. Los investigadores toman como referente datos correspondientes al período 1989-2004 en diferentes comunidades y aplican una serie variables específicas para determinar los posibles efectos que puedan derivarse en función de la titularidad en el gobierno.
    Keywords: GrowthAccounting,PanelData,Federalism,TFP
    JEL: O18 C33
    Date: 2009
  16. By: Alberto F. Alesina; Paola Giuliano
    Abstract: This paper discusses what determines the preferences of individuals for redistribution. We review the theoretical literature and provide a framework to incorporate various effects previously studied separately in the literature. We then examine empirical evidence for the US, using the General Social Survey, and for a large set of countries, using the World Values Survey. The paper reviews previously found results and provides several new ones. We emphasize, in particular, the role of historical experiences, cultural factors and personal history as determinants of preferences for equality or tolerance for inequality.
    JEL: I38
    Date: 2009–03

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