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

  1. A Positive Theory of Unemployment Insurance and Employment Protection By Anesi, Vincent; De Donder, Philippe
  2. Are democratic governments more efficient? By Adam, Antonis; Delis, Manthos D; Kammas, Pantelis
  3. Economic voting and electoral volatility in Turkish provinces By Hazama, Yasushi
  4. Faces of politicians: Babyfacedness predicts inferred competence but not electoral success By Poutvaara, Panu; Jordahl, Henrik; Berggren, Niclas
  5. Voting Motives, Group Identity, and Social Norms By Carlsson, Fredrik; Johansson-Stenman, Olof
  6. Constitutional Rules and Agricultural Policy Outcomes By Olper, Alessandro; Raimondi, Valentina
  7. Explaining Agricultural Distortion Patterns : The Roles of Idealogy, Inequality, Lobbying and Public Finance By Dutt, Pushan; Mitra, Devashish
  8. Agricultural Price Distortion and Stabilization: Stylized facts and Hypothesis Tests By Masters, William A.; Garcia, Andres F.
  9. State-Owned Enterprises, Political Ideology, and Redistribution By Veysel Avsar; Cem Karayalcin; Mehmet Ali Ulubasoglu
  10. Immigrants’ Attitudes towards Redistribution: Implications for the Welfare State By Bergh, Andreas; Fink, Günther
  12. Pay for Politicians and Candidate Selection: An Empirical Analysis By Kotakorpi, Kaisa; Poutvaara, Panu
  13. Political Economy of Agricultural Trade Interventions in Africa By Bates, Robert H.; Block, Steven
  14. Political Economy of Agricultural Distortions:The Literature to Date By Swinnen, Johan F.M.
  15. Determinants of Farm Policies in the United Status, 1996-2008 By Orden, David; Blandford, David; Josling, Timothy
  16. Special Interests versus the Public Interest in Policy Determination By Rausser, Gordon C.; Roland, Gerard
  17. Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century By Raghuram G. Rajan; Rodney Ramcharan

  1. By: Anesi, Vincent; De Donder, Philippe
    Abstract: The objective of this paper is to provide a political economy explanation of the empirically observed negative correlation between employment protection and insurance. We study an economy composed of four groups of agents (capitalists, unemployed people, low- and high-skilled workers), each one represented by a politician. Politicians first form political parties and then compete in a winner-takes-all election by simultaneously proposing policy bundles composed of an employment protection level and an unemployment benefit. We first show that, in the absence of parties (i.e., in a citizen-candidate model), low-skilled workers are decisive and support a maximum employment protection level together with some unemployment benefit. We then obtain that, under some conditions, allowing for party formation results in all policy equilibria being in the Pareto set of the coalition formed by high-skilled workers together with unemployed people. Policies in this Pareto set exhibit a negative correlation between employment protection and unemployment benefit.
    Keywords: bidimensional voting; citizen-candidate; flexicurity; labor market rigidities; party competition
    JEL: D72 J65 J68
    Date: 2009–06
  2. By: Adam, Antonis; Delis, Manthos D; Kammas, Pantelis
    Abstract: This paper explores the relationship between public sector efficiency (PSE) and the level of democracy, both theoretically and empirically. At the theoretical level a simple model of elections with two time periods is presented, which takes into account whether the political regime is democratic or not. Specifically, we assume that elected officials in democracies are “more” accountable to voters than the respective ones in autocracies. This mechanism induces the democratic politicians to produce the public good in a more efficient way, in order to remain in power. In the empirical section we examine the effect of democracy on PSE for a panel dataset of 50 developing and developed countries over the period 1980-2000. Our results suggest that the relationship between PSE and democracy is positive and statistically significant, thus confirming our theoretical priors.
    Keywords: H11; D7
    JEL: D7 H7
    Date: 2009–03–08
  3. By: Hazama, Yasushi
    Abstract: Two groups of questions were addressed in this paper: (1) Is voter punishment of the incumbent the primary factor in electoral volatility? Are there any other types of vote swings that underlie volatility? (2) In general, does a decline in economic growth destabilize voter behavior? If so, what kinds of vote swings does an economic downturn tend to generate? Provincial-level panel data analysis yielded the following results: (1) Changes in volatility is primarily due to vote swings from the incumbent to the opposition and also to and from left-wing and right-wing parties. (2) Lower economic growth increases electoral volatility. Economic decline induces vote swings not only from the government to the opposition but also from left-wing to right-wing parties. This is probably because right-wing parties seem more concerned with economic issues and are thus more popular than left-wing parties with lower-income voters.
    Keywords: Electoral volatility, Economic voting, Panel analysis, Elections, Turkey
    Date: 2009–05
  4. By: Poutvaara, Panu (Department of Economics, University of Helsinki); Jordahl, Henrik (The Research Institute of Industrial Economics); Berggren, Niclas (The Ratio Institute)
    Abstract: Recent research has documented that competent-looking political candidates do better in U.S. elections and that babyfaced individuals are generally perceived to be less competent than maturefaced individuals. Taken together, this suggests that babyfaced political candidates are perceived as less competent and therefore fare worse in elections. We test this hypothesis, making use of photograph-based judgments by 2,772 respondents of the facial appearance of 1,785 Finnish political candidates. Our results confirm that babyfacedness is negatively related to inferred competence in politics. Despite this, babyfacedness is either unrelated or positively related to electoral success, depending on the sample of candidates.
    Keywords: Babyfacedness; Competence; Beauty; Trustworthiness; Elections
    JEL: D72 J45 J70
    Date: 2009–06–18
  5. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The conventional rational voter model has problems explaining why people vote, since the costs typically exceed the expected benefits. This paper presents Swedish survey evidence suggesting that people vote based on a combination of instrumental and expressive motives, and that people are strongly influenced by a social norm saying that it is an obligation to vote. Women and older individuals are more affected by this norm than others. The more rightwing a person is, the less unethical he/she will perceive selfish voting to be. Moreover, individuals believe that they themselves vote less selfishly than others and that people with similar political views as themselves vote less selfishly than people with the opposite political views, which is consistent with social identity theory.<p>
    Keywords: social norms; self-interested voting; expressive voting; sociotropic voting; selfserving bias; group identity; in-group bias; social identity theory
    JEL: D70 D72
    Date: 2009–06–17
  6. By: Olper, Alessandro; Raimondi, Valentina
    Abstract: This paper deals with the effect of constitutional rules on agricultural policy outcomes in a panel of observations for more than 70 developing and developed countries in the 1955-2005 period. Testable hypotheses are drawn from recent developments in the comparative politics literature that see political institutions as key elements in shaping public policies. Using differences-in-differences regressions we find a positive effect of a transition into democracy on agricultural protection. However, this average effect masks substantial heterogeneities across different forms of democracy. Indeed, what matters are transitions to proportional (as opposed to majoritarian) democracies, as well as to permanent (as opposed to temporary) democracies. Moreover, while we do not detect significant differences across alternative forms of government (presidential versus parliamentary systems), there is some evidence that the effect of proportional election is exacerbated under parliamentary regimes, and diminished under presidential ones.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Comparative Political Economics, Agricultural Distortions, Constitutional Rules, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, D72, H23, O13, P16,
    Date: 2009–05
  7. By: Dutt, Pushan; Mitra, Devashish
    Abstract: In this paper, we examine the political economy drivers of the variation in agricultural protection, both across countries and within countries over time. The paper starts by listing the key insights provided by both the theoretical and empirical literature on the political economy of trade policy formulation. We then set out a basic framework that allows us to put forth various testable hypotheses on the variation and evolution of agricultural protection. We find that both the political ideology of the government and the degree of income inequality are important determinants of agricultural protection. Thus, both the political-support-function approach as well as the median-voter approach can be used in explaining the variation in agricultural protection across countries and within countries over time. The results are consistent with the predictions of a model that assumes that labor is specialized and sector-specific in nature. Some aspects of protection also seem to be consistent with predictions of a lobbying model in that agricultural protection is negatively related to agricultural employment and positively related to agricultural productivity. Public finance aspects of protection also seem to be empirically important.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural protection, political economy, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, D72, D78, F11,
    Date: 2009–05
  8. By: Masters, William A.; Garcia, Andres F.
    Abstract: This paper describes agricultural policy choices and tests some predictions of political economy theories. It begins with three broad stylized facts: governments tend to tax agriculture in poorer countries, and subsidize it in richer ones, tax both imports and exports more than nontradables, and tax more and subsidize less where there is more land per capita. We test a variety of political-economy explanations, finding results consistent with hypothesized effects of rural and urban constituentsâ rational ignorance about small per-person effects, governance institutionsâ control of rent-seeking by political leaders, governmentsâ revenue motive for taxation, and the role of time consistency in policy-making. We also find that larger groups obtain more favorable policies, suggesting that positive group size effects outweigh any negative influence from more free-ridership, and that demographically driven entry of new farmers is associated with less favorable farm policies, suggesting the arrival of new farmers erodes policy rents and discourages political activity by incumbents. Another new result is that governments achieve very little price stabilization relative to our benchmark estimates of undistorted prices, and governments in the poorest countries actually destabilize domestic prices.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural price distortions, political economy, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, D72, D78, F11, H23,
    Date: 2009–05
  9. By: Veysel Avsar; Cem Karayalcin; Mehmet Ali Ulubasoglu
    Abstract: Many economies have undergone the process of privatizing their state-owned enterprises. Recently, however, this process has slowed down in some economies and has been completely stalled in others. Here we formalize the view that this is so because these enterprises are major instruments of income redistribution and, in economies with significant degrees of income inequality, segments of the population that benefit from this redistribution would use their political power to oppose its abandonment. We find strong empirical support for this hypothesis using cross-country data on the relative size of the state-owned-enterprise sector. We also find robust evidence that left-wing (vis-à-vis right-wing) governments are associated with greater redistribution in more unequal societies. Further, this effect is non-linear, implying that redistribution becomes more costly at higher levels of inequality. We also find the same result for authoritarian (vis-à-vis democratic) governments.
    Date: 2009–06–22
  10. By: Bergh, Andreas (Ratio & Lund University); Fink, Günther (Harvard School of Public Health)
    Abstract: Using data from the World Value Survey we examine first and second generation immigrants’ attitudes towards income inequality and redistribution. We find that first generation immigrants are on average less favorable to redistribution compared to non-immigrants. This effect is particularly pronounced in the Nordic welfare states, while in residual welfare states immigrants have stronger preferences for more government involvement, but not necessarily towards more redistribution. We find only marginal differences for second generation immigrants, suggesting a rather rapid adaptation of local norms and political preferences.
    Keywords: Immigration; redistribution; welfare state; attitudes
    JEL: H23 J61
    Date: 2009–06–15
  11. By: Maria De Paola; Rosetta Lombardo; Vincenzo Scoppa (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: In this paper we analyse the effect of gender quotas on women involvement in political activity using a rich data set providing information on all Italian local administrators elected from 1985 to 2007. Gender quotas were introduced in Italy by law in 1993 and were in force until 1995. Because of the short period covered by the reform, some municipalities never voted under the gender quota regime. This allows us to individuate a treatment and a control group and to estimate the effects of gender quotas using a difference-in-differences estimation strategy. Our estimates show that women representation in politics after the reform has increased significantly more in municipalities that were interested by the reform compared to municipalities that were not affected. This result holds true also if we exclude from our analysis elections taking place during the period in which the reform was in force. Moreover, the higher women representation in “Gender Quota Municipalities” is not related to the advantages that women elected during the reform have obtained from incumbency and does not seem to be driven by different temporal trends among Southern and Northern regions. These findings suggest that affirmative actions are useful to break down stereotypes against women.
    Keywords: Affirmative Actions, Gender Quotas, Discrimination, Stereotypes, Politicians, Natural Experiment
    JEL: D72 D78 J71 J16
    Date: 2009–06
  12. By: Kotakorpi, Kaisa (University of Tampere); Poutvaara, Panu (University of Helsinki)
    Abstract: In this paper, we estimate the effect of pay for politicians on who wants to be a politician. We take advantage of a considerable 35 percent salary increase of Finnish MPs in the year 2000, intended to make the pay for parliamentarians more competitive. A difference-indifferences analysis, using candidates in municipal elections as a control group, suggests that the higher salary had the intended effect among women, whether measured by education or occupational qualifications. We also examine cross-party differences.
    Keywords: pay for politicians, candidate selection, gender differences in politics
    JEL: D72 J3 J45
    Date: 2009–06
  13. By: Bates, Robert H.; Block, Steven
    Abstract: This paper uses new data on agricultural policy interventions to examine the political economy of agricultural trade policies in Sub-Saharan Africa. Historically, African governments have discriminated against agricultural producers in general (relative to producers in non-agricultural sectors), and against producers of export agriculture in particular. While more moderate in recent years, these patterns of discrimination persist. They do so even though farmers comprise a political majority. Rather than claiming the existence of a single best approach to the analysis of policy choice, we explore the impact of three factors: institutions, regional inequality, and tax revenuegeneration. We find that agricultural taxation increases with the rural population share in the absence of electoral party competition; yet, the existence of party competition turns the lobbying disadvantage of the rural majority into political advantage. We also find that privileged cash crop regions are particular targets for redistributive taxation, unless the country's president comes from that region. In addition, governments of resource-rich countries, while continuing to tax export producers, reduce their taxation of food consumers.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, agriculture, taxation, political economy, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, O13,
    Date: 2009–05
  14. By: Swinnen, Johan F.M.
    Abstract: The 1980s and first half of the 1990s were a very active period in the field of political economy of agricultural protection. While the past decade has witnessed a slowdown in this area, there have been very important developments on political economy in other parts of the economics profession. This paper reviews key new insights and developments in the general political economy literature and draws implications for the study of the political economy of distortions to agricultural incentives.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, Political economy, agricultural distortions, high-income countries, developing countries, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, N50, O13, P16, P26,
    Date: 2009–05
  15. By: Orden, David; Blandford, David; Josling, Timothy
    Abstract: This paper focuses on the political economy of U.S. farm policy since the Uruguay Round trade negotiations concluded in 1994 and established the WTO. The continued ability of the powerful farm lobby in the United States to elicit support in the political arena is evident from this analysis. Yet there have been some substantial changes in policy that have reduced their distortionary effects, as well as some setbacks to liberalizing reform. New Doha Round commitments could put further constraints on subsidies provided by some U.S. policy instruments. And despite the ability of the farm lobby to retain its support programs through 2012, there are several political uncertainties about the alignments that have allowed U.S. farm support to endure.
    Keywords: Distorted incentives, agricultural and trade policy reforms, national agricultural development, United States farm policies, political economy of agricultural distortions, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, O13, P22,
    Date: 2009–05
  16. By: Rausser, Gordon C.; Roland, Gerard
    Abstract: This paper focuses on recent theoretical developments in political economy and what role they might play in explaining and reforming individual country and global distortions in food and agricultural markets. Four groups of forces are isolated: political governance structures emphasizing the role of democratic mechanisms; the design of polycentric structures for assigned governmental authority for setting policy instruments; market structure and other socioeconomic characteristics; and the role of sector mobility and asset diversification. Each of these forces are distilled and data sources are reviewed that will allow econometric specifications that have both explanatory and policy reform implications.
    Keywords: Political economy, agricultural distortions, public interest, vested interests, Agricultural and Food Policy, International Relations/Trade, F13, H23, N50, Q18, O13, P16, P26,
    Date: 2009–05
  17. By: Raghuram G. Rajan; Rodney Ramcharan
    Abstract: Economists have argued that a high concentration of land holdings in a country can create powerful interest groups that retard the creation of economic institutions, and thus hold back economic development. Could these arguments apply beyond underdeveloped countries with backward political institutions? We find that in the early 20th century, the distribution of land in the United States is correlated with the extent of banking development. Correcting for state effects, counties with very concentrated land holdings tend to have disproportionately fewer banks per capita in the 1920s. Banks were especially scarce both when landed elites' incentive to suppress finance, as well as their ability to exercise local influence, was higher, suggesting support for a political economy explanation. Counties with high land concentration and fewer banks also had higher interest rates and lower loan to value ratios, consistent with more restricted access to finance. Interestingly, counties with greater land concentration had fewer loan losses during the Great Depression, consistent with borrowers in those counties being less risky, even while they had more limited access to credit in the years leading up to the Depression. We draw lessons from this episode for understanding financial and economic development.
    JEL: G20 O16 O43
    Date: 2009–06

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