nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒09‒19
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Immigration Policy with Partisan Parties By Humberto Llavador; Angel Solano-García
  2. Candidate nomination procedures andpolitical selection: evidence from LatinAmerican parties By Fernando Aragon
  3. It Takes Two to Tango: Lobbies and the Political Business Cycle By Horgos, Daniel; Zimmermann, Klaus W.
  4. Soldiers or Bureaucrats? Conflict and the Military’s Role in Policy-Making By Gabriel Leon
  5. Direkte Demokratie und Menschenrechte By Gebhard Kirchgässner
  6. Caste and punishment : the legacy of caste culture in norm enforcement By Hoff, Karla; Kshetramade, Mayuresh; Fehr, Ernst
  7. Economic Growth, Law and Corruption: Evidence from India By Sambit Bhattacharyya; Raghbendra Jha
  8. Dark Side of Social Capital Social Preferences and Corruption By Jellal, Mohamed
  9. The Right Amount of Trust By Jeffrey Butler; Paola Giuliano; Luigi Guiso
  10. Do Small States Get More Federal Monies?Myth and Reality About the US SenateMalapportionment By Valentino Larcinese; Leonzio Rizzo; Cecilia Testa

  1. By: Humberto Llavador; Angel Solano-García
    Abstract: This paper analyzes the political economy of immigration when the salient electoral issue is the level of immigrants and the relevant immigration policy is the expenditure in immigration control. We consider that immigration affects voters’ welfare through economic and non economic factors. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. Numerical simulations provide the levels of immigration proposed by the two parties and the composition of parties’ constituencies. At equilibrium, parties propose different levels of immigration, located to the left and to the right of the median voter’s ideal point. We find that improvements in the efficacy of immigration control increases the probability of victory of the party proposing a tighter immigration policy and decreases the disparity in parties’ policy proposals.
    Keywords: Immigration, ideological parties, unskilled and skilled labor
    JEL: J61 F22 D72
    Date: 2009–08
  2. By: Fernando Aragon
    Abstract: This paper explores empirically the role of nomination procedures on politicalselection and the determinants for adopting contestable selection methods such asprimaries. Using data from Latin American parties, I find evidence that politicalcompetition increases probability of primary adoption. Moreover, primarynominated candidates obtained larger vote shares and during their mandatecountries experienced improvements in several measures of quality of government.The results exploit within party variation and are robust to relevant identificationconcerns. Together, these findings suggest that nomination procedures matter forpolitical selection and that the quality differences are significant enough to influenceelectoral and economic outcomes.
    Keywords: Primaries, political selection, political competition, quality of politicians.
    JEL: D72 D73 H39 O12
    Date: 2009–01
  3. By: Horgos, Daniel (Helmut Schmidt University, Hamburg); Zimmermann, Klaus W. (Helmut Schmidt University, Hamburg)
    Abstract: With interest groups significantly affecting economic performance (according to Mancur Olson) and a vital interest of governments in economic growth and low unemployment in order to win elections, there should be a link between political business cycles and the evolution of lobbies over time which has totally been ignored in the literature up to now. In modeling this link in a theoretical and empirical way we try to answer two questions: Is it possible to interpret Olson´s Law of Interest Groups not only as a long run phenomenon but also in a short-run perspective, integrating it into the theory of political business cycles? And: is there any empirical evidence that a typical pattern of lobby behavior and macroeconomic status exists which is consistent over a couple of election periods? In order to investigate these issues, we first analyze some literature that is usually ignored in the more technical contributions evaluating Olson´s law, but proves to be highly important as background for answering the above mentioned questions. We then illustrate how a model consisting of Olson´s interest-groups theory and the endeavors of governments to win the majority of votes in elections could look like, before we perform a time-series-analysis based on the lobby-list of the German Bundestag in order to gain some more insights into the relationships between lobbies, governments and voters. As a result we discover a consistent behavior of the lobbies over the cycle that boils down to some kind of non-aggression pact between the lobbies and the governments irrespective of their political alignments.
    Keywords: interest groups; political business cycles; growth; unemployment; inflation
    JEL: D72 D78
    Date: 2009–09–07
  4. By: Gabriel Leon
    Abstract: One of the most striking institutional features of many less developed countries is that their militaries are closely involved in policy-making, potentially having a large impact on economic outcomes. This paper examines the role of the military in setting policy. For this purpose it develops one of the first models of the military, where its political involvement can take two forms: direct when the military runs the government, and indirect when it influences policy without governing directly. We focus on civilian regimes and find that war decreases the payoff to the military from both forms of involvement, but also makes staging successful coups easier. In equilibrium, an increase in the likelihood of war makes indirect involvement less likely; its impact on coups, which are aimed at establishing direct control, is non-monotonic. We show empirical evidence for this non-monotonic relationship, withcoups being least likely for low and high probabilities of war.
    Keywords: institutions, conflict, political economy, military, war, coups
    JEL: O38 O17 H11 H56 D72
    Date: 2009–07
  5. By: Gebhard Kirchgässner
    Abstract: There is a basic tension between the principle of democracy and the rule of law. This becomes obvious whenever the Swiss citizens accept an initiative that is incompatible with the European Convention on Human Rights. First, we discuss the traditions behind these two principles before we survey the empirical papers about the relation between direct democracy and minority rights in the US as well as in Switzerland. Then we discuss the literature on the relation between direct democracy and death penalty. There, the conflict becomes rather obvious. Solutions, which will always involve compromises between these two principles, necessitate some role of the Supreme Court, at the cost of some, but only minor limitations of direct popular rights.
    Keywords: Direct Democracy, Human Rights, Constitution, Rule of Law
    JEL: H11 H72 H74
    Date: 2009–09
  6. By: Hoff, Karla; Kshetramade, Mayuresh; Fehr, Ernst
    Abstract: Well-functioning groups enforce social norms that restrain opportunism, but the social structure of a society may encourage or inhibit norm enforcement. This paper studies how the exogenous assignment to different positions in an extreme social hierarchy - the caste system - affects individuals'willingness to punish violations of a cooperation norm. Although the analysis controls for individual wealth, education, and political participation, low-caste individuals exhibit a much lower willingness to punish norm violations that hurt members of their own caste, suggesting a cultural difference across caste status in the concern for members of one’s own community. The lower willingness to punish may inhibit the low caste’s ability to sustain collective action and so may contribute to its economic vulnerability.
    Keywords: Gender and Social Development,Corruption&Anitcorruption Law,Anthropology,Access to Finance,Social Inclusion&Institutions
    Date: 2009–09–01
  7. By: Sambit Bhattacharyya; Raghbendra Jha
    Abstract: In Is corruption influenced by economic growth? Are legal institutions such as the ‘Right to Information Act (RTI) 2005’ in India effective in curbing corruption? Using a novel panel dataset covering 20 Indian states and the periods 2005 and 2008 we estimate the causal effects of economic growth and law on corruption. To tackle endogeneity concerns we use forest share to total land area as an instrument for economic growth. We notice that forest share is a positive predictor of growth. This is in line with the view that forestry contributes positively to economic growth. To capture the effect of law on corruption we use the ‘difference-in-difference’ estimation method. Our results indicate that economic growth reduces overall corruption as well as corruption in banking, land administration, education, electricity, and hospitals. Growth however has little impact on corruption perception. In contrast the RTI Act reduces both corruption experience and corruption perception. Our basic result holds after controlling for state fixed effects and various additional covariates. It is also robust to alternative instruments and outlier sensitivity tests.
    Keywords: Economic Growth; Law; Corruption
    JEL: D7 H0 K4 O1
    Date: 2009
  8. By: Jellal, Mohamed
    Abstract: Using the principal-agent- supervisor paradigm, this paper examines the occurrence of collusion in a setting where the principal has no information about the supervisor and the agent does not necessarily know the supervisor’s preferences. We formally prove the occurrence of collusion is more likely when the agent has information about the supervisor. This result suggests that corruption, which is likely to emerge in long term reciprocal relationships between public officials and potential bribery, may be reduced by the means of staff rotation. Evidence from an experimental study supports this proposition
    Keywords: Principal Agent Supervisor paradigm; Social Capital ;Social Preferences;Bureaucracy;Corruption , Staff Rotation
    JEL: D73 Z13 D82
    Date: 2009–09–08
  9. By: Jeffrey Butler; Paola Giuliano; Luigi Guiso
    Abstract: A vast literature has investigated the relationship between trust and aggregate economic performance. We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs available in the European Social Survey. We show that heterogeneity of trust beliefs in the population, coupled with the tendency of individuals to extrapolate beliefs about others from their own level of trustworthiness, could generate the non-monotonic relationship between trust and income. Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population. On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up profitable opportunities too often and, consequently, underperform. Our estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college. Furthermore, we find that people who trust more are cheated more often by banks as well as when purchasing goods second hand, when relying on the services of a plumber or a mechanic and when buying food. We complement the survey evidence with experimental evidence showing that own trustworthiness and expectations of others' trustworthiness in a trust game are strongly correlated and that performance in the game is hump-shaped.
    JEL: A1 A12 D01 O15 Z1
    Date: 2009–09
  10. By: Valentino Larcinese; Leonzio Rizzo; Cecilia Testa
    Abstract: We analyze the relationship between senate malapportionment and the allocation ofthe US federal budget to the states during the period 1978-2002. A substantialliterature originating from the influential paper by ?) finds that small andoverrepresented states get significantly larger shares of federal funds. We show thatthese studies suffer from fundamental identification problems and grosslyoverestimate the impact of malapportionment. Most of the estimated impact is not ascale but a change effect. Rather than evidence of "small state advantage", we findthat states with fast growing population are penalized in the allocation of the federalbudget independently of whether they are large or small.
    Keywords: federal budget, malapportionment, small state advantage,overrepresentation
    JEL: D72 H61 H77
    Date: 2009–04

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