nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒08‒16
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Lobbying of Firms by Voters By Matthias Dahm; Robert Dur; Amihai Glazer
  2. What is the probability your vote will make a difference? By Andrew Gelman; Nate Silver; Aaron Edlin
  3. Political Selection and Persistence of Bad Governments By Daron Acemoglu; Georgy Egorov; Konstantin Sonin
  4. Do re-election probabilities influence public investment? By Jon H. Fiva; Gisle James Natvik
  5. Partisan Representation in Congress and the Geographic Distribution of Federal Funds By David Albouy
  6. Food production, distribution and culture: public views, interests and concerns By Kupiec-Teahan, Beata; Leat, Philip; Revoredo-Giha, Cesar
  7. Politicians at work. The private returns and social costs of political connections By Federico Cingano; Paolo Pinotti
  8. Does Decentralization Matter for Regional Disparities? A Cross-Country Analysis By Roberto Ezcurra; Andrés Rodríguez-Pose
  9. European Governance, or Governmentality? Reflections on the EU‘s System of Government By Chris Shore
  10. Social capital and the viability of stakeholder-oriented firms: Evidence from Norwegian savings banks By Charlotte Ostergaard; Ibolya Schindele; Bent Vale
  11. One Nation Under a Groove? Identity and Multiculturalism in Britain By Andreas Georgiadis; Alan Manning

  1. By: Matthias Dahm (Universitat Rovira i Virgili); Robert Dur (Erasmus University Rotterdam, CESifo, IZA); Amihai Glazer (University of California, Irvine)
    Abstract: A firm may induce voters or elected politicians to support a policy it favors by suggesting that it is more likely to invest in a district whose voters or representatives support the policy. In equilibrium, no one vote may be decisive, and the policy may gain strong support though the majority of districts suffer from adoption of the program. When votes reveal information about the district, the firm's implicit promise or threat can be credible.
    Keywords: Lobbying; voting; special interests; influence
    JEL: C72 D72 D78
    Date: 2009–07–31
  2. By: Andrew Gelman; Nate Silver; Aaron Edlin
    Abstract: One of the motivations for voting is that one vote can make a difference. In a presidential election, the probability that your vote is decisive is equal to the probability that your state is necessary for an electoral college win, times the probability the vote in your state is tied in that event. We computed these probabilities a week before the 2008 presidential election, using state-by-state election forecasts based on the latest polls. The states where a single vote was most likely to matter are New Mexico, Virginia, New Hampshire, and Colorado, where your vote had an approximate 1 in 10 million chance of determining the national election outcome. On average, a voter in America had a 1 in 60 million chance of being decisive in the presidential election.
    JEL: H0 K0
    Date: 2009–08
  3. By: Daron Acemoglu; Georgy Egorov; Konstantin Sonin
    Abstract: We study dynamic selection of governments under different political institutions, with a special focus on institutional “flexibilityâ€. A government consists of a subset of the individuals in the society. The competence level of the government in office determines collective utilities (e.g., by determining the amount and quality of public goods), and each individual derives additional utility from being part of the government (e.g., corruption or rents from holding office). We characterize dynamic evolution of governments and determine the structure of stable governments, which arise and persist in equilibrium. Perfect democracy, where current members of the government do not have an incumbency advantage or special powers, always leads to the emergence of the most competent government. However, any deviation from perfect democracy destroys this result. There is always at least one other, less competent government that is also stable and can persist forever, and even the least competent government can persist forever in office. Moreover, a greater degree of democracy may lead to worse governments. In contrast, in the presence of stochastic shocks or changes in the environment, greater democracy corresponds to greater flexibility and increases the probability that high competence governments will come to power. This result suggests that a particular advantage of democratic regimes may be their greater adaptability to changes rather than their performance under given conditions. Finally, we show that, in the presence of stochastic shocks, “royalty-like†dictatorships may be more successful than “junta-like†dictatorships, because they might also be more adaptable to change.
    JEL: C71 D71 D74
    Date: 2009–08
  4. By: Jon H. Fiva (University of Oslo); Gisle James Natvik (Norges Bank (Central Bank of Norway))
    Abstract: We identify exogenous variation in incumbent policymakers' re-election probabilities and explore empirically how this variation affects the incumbents' investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.
    Keywords: Political economics, Strategic capital accumulation, Identifying popularity shocks
    JEL: E62 H40 H72
    Date: 2009–08–11
  5. By: David Albouy
    Abstract: In a two-party legislature, districts represented by the majority party may receive greater spending if legislators in the majority have greater proposal power or disproportionately form coalitions with each other. The type of spending received may depend on the party-identity of its legislators if parties differ in ideology. Estimates from the United States -- using fixed-effect and regression-discontinuity designs -- indicate that states represented by members of Congress in the majority receive greater federal grants, especially in transportation. States represented by Republicans receive more defense spending than those represented by Democrats; the latter receive more spending for education and urban development.
    JEL: H5 H77
    Date: 2009–08
  6. By: Kupiec-Teahan, Beata; Leat, Philip; Revoredo-Giha, Cesar
    Abstract: A basic right of both a consumer and a citizen is the right to be heard, and their voiced concerns have to be taken into account when developing policies and obtaining trust for government actions. Therefore this study focuses on consumersâ interests, opinions and expectations which are identified and categorised according to subject area, degree of involvement and political agenda of a consumer. The paper draws on the responses of individual members of the public in the National Food Policy discussion initiated by the Scottish Government in 2008. Altogether 246 responses were subjected to quantitative analysis of texts, supported by text mining. A variety of interests and opinions underpinning the political agendas of individuals responding to the National Food Policy discussion document were identified and discussed in the paper in the context of political consumerism and influence citizens-consumers are likely to have on policy development and its subsequent implementation. In the broad perspective of the Scottish food supply chain, the three pillars of sustainability: economy, environment and society, are defining the nature of public concerns and expectations. Findings could be applied across many different policy areas including food production and distribution, heath education and promotion, support of small local businesses, environment protection, travel, waste management/recycling and others.
    Keywords: Food Policy, Scotland, Text analysis. Consumer research, Consumer/Household Economics,
    Date: 2009–04–01
  7. By: Federico Cingano (Bank of Italy, Economic Research Department); Paolo Pinotti (Bank of Italy, Economic Research Department)
    Abstract: We quantify the private returns and social costs of political connections exploiting a unique longitudinal dataset that combines matched employer-employee data for a representative sample of Italian firms with administrative archives on the universe of individuals appointed in local governments over the period 1985-97. According to our results, the revenue premium granted by political connections amounts to 5% on average, it is obtained through changes in domestic sales but not in exports, and it is not related to improvements in firm productivity. The connection premium is positive for upstream producers for the public administration only, and larger (up to 25%) in areas characterized by high public expenditure and high levels of corruption. These findings suggest that the gains in market power derive from public demand shifts towards politically connected firms. We estimate such shifts reduce the provision of public goods by approximately 20%.
    Keywords: political connections, social welfare, productivity, employer-employee data
    JEL: D21 D73 H72 J31
    Date: 2009–05
  8. By: Roberto Ezcurra; Andrés Rodríguez-Pose
    Abstract: This paper looks at the relationship between fiscal and political decentralization and theevolution of regional inequalities in a panel of 26 countries - 19 developed and 7 developing- for the period between 1990 and 2006. Using an instrumental variables method, it finds thatwhereas for the whole sample decentralization is completely dissociated for the evolution ofregional disparities, the results are highly contingent on the level of development, the existinglevel of territorial inequalities, and the fiscal redistributive capacity of the countries in thesample. Decentralization in high income countries has, if anything, been associated with areduction of regional inequality. In low and medium income countries, fiscal decentralizationhas been associated with a significant rise in regional disparities, which the positive effects ofpolitical decentralization have been unable to compensate. Policy preferences by subnationalgovernments for expenditure in economic affairs, education, and social protection havecontributed to this trend.
    Keywords: Fiscal decentralization, political decentralization, regional disparities, territorialinequality, fiscal redistribution
    JEL: H11 H71 R11
    Date: 2009–07
  9. By: Chris Shore
    Abstract: This paper offers a critical exploration of the term ‘governance’, its rise to prominence within EU political discourse, and the new forms of authority and expertise it has come to be associated with within the EU’s evolving political regime. Its argues that a critical understanding of EU governance might be advanced if scholars look beyond the conventional political science literature (where governance is often ontologized as that form of politics and authority which reflects the social reality of administering complex societies), and interpret it instead in terms of recent debates about neoliberal governmentality. I ask, what does the Commission’s appropriation of this ambiguous concept reveal about the way EU politicians, experts and policy makers are re-conceptualising Europe and the problem of European government?
    Date: 2009–09–01
  10. By: Charlotte Ostergaard (Norwegian School of Management and Norges Bank); Ibolya Schindele (Norwegian School of Management); Bent Vale (Norges Bank (Central Bank of Norway))
    Abstract: Stakeholder oriented governance systems are often thought to hamper efficiency. We show that social capital improves the viability of stakeholder-oriented firms in competitive markets. Studying exits from the population of Norwegian savings banks after deregulations, we find that banks located in communities with high social capital have a higher probability of survival. We propose that social capital facilitates collective decision-making, ensuring that banks internalize the preferences of the community in return for continued community patronage. Consistently, we find that in high social capital areas banks operate with lower interest rate margins, lower returns on assets, and lower loan losses.
    Keywords: Political economics, Strategic capital accumulation, Identifying popularity shocks
    JEL: E62 H40 H72
    Date: 2009–08–11
  11. By: Andreas Georgiadis; Alan Manning
    Abstract: There is a lot of evidence that identity matters for behavior. There is a widespread belief that societies will function better if they manage to establish a common sense of identity among the population. And there are also contemporary fears that this common identity is threatened in several countries. In this paper we investigate the correlates of various measures of identity in the UK, a country currently greatly concerned about a perceived failure to build a common identity from a collection of diverse cultures. We find that the alleged failure to establish a British identity among ethnic minorities is exaggerated - for most their ethnicity and religion seem no barrier to a British identity. But there is a segment of the white population that clearly feels neglected and alienated, and are hostile to the multicultural agenda.
    Keywords: Identity, Multiculturalism
    JEL: D71 Z13
    Date: 2009–07

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