nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒09‒26
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Comment on: Electoral Contests, Incumbency Advantages, and Campaign Finance By Ivan Pastine; Tuvana Pastine
  2. Party Affiliation, Partisanship, and Political Beliefs: A Field Experiment By Alan S. Gerber; Gregory A. Huber; Ebonya Washington
  3. The effect of information on voting behavior By Nordin, Mattias
  4. The Afghan Economy After the Election By Manabu Fujimura
  5. Love of Variety and Immigration By Dhimitri Qirjo
  6. Income Redistribution and Public Good Provision in a Diverse Society By Selim Jürgen Ergun
  7. The political economy of balanced-budget rules By Jerome Creel; Etienne Farvaque
  8. Strategic, Sincere and Heuristic Voting under Four Election Rules: An Experimental Study By BLAIS, Andre; LASLIER, Jean-François; SAUGER, Nicolas; VAN DER STRAETEN, Karine
  9. Islam and Democracy: Malaysia after 50 Years By Eduard J. Bomhoff
  10. Do Leaders Affect Government Spending Priorities? By Adi Brender; Allan Drazen
  11. Country size, economic performance and the political economy of the euro zone : an empirical study of the size divide By Olfa Alouini
  12. Cross-border lobbying in preferential trading agreements: implications for external tariffs By Subhayu Bandyopadhyay; Sajal Lahiri; Howard J. Wall
  13. Caps on Political Contributions, Monetary Penalties and Politician Preferences By Ivan Pastine; Tuvana Pastine
  14. The Political Economy of Ethnolinguistic Cleavages By Klaus Desmet; Ignacio Ortuño-Ortín; Romain Wacziarg
  15. Direkte Demokratie und Menschenrechte By Gebhard Kirchgässner
  16. Speed Money: Time, Corruption, and Trade By Shepherd, Ben
  17. The Right Amount of Trust By Jeffrey Butler; Paola Giuliano; Luigi Guiso

  1. By: Ivan Pastine (University College Dublin); Tuvana Pastine (National University of Ireland, Maynooth)
    Abstract: This paper completes Meirowitz (2008) by analyzing the effect of a cap on political campaign spending in an environment where voters have initial preferences over political candidates. The policy implications are starkly different from the previously analyzed case where voters are indifferent between candidates in the absence of campaign spending. We find that a spending cap always favors the a priori popular candidate. This result holds irrespective of whether it is the incumbent or the challenger who is able to more effectively generate and spend contributions.
    Keywords: Campaign Finance Reform, Spending Limit, Expenditure Limit, Incumbency Advantage, Clean Elections
    Date: 2009–08–01
  2. By: Alan S. Gerber; Gregory A. Huber; Ebonya Washington
    Abstract: Political partisanship is strongly correlated with attitudes and behavior, but it is unclear from this pattern whether partisan identity has a causal effect on political behavior and attitudes. We report the results of a field experiment designed to investigate the causal effect of party identification. Prior to the February 2008 Connecticut presidential primary, researchers sent a mailing to a random sample of unaffiliated registered voters informing them of the need to register in order to participate in the upcoming primary. Comparing post-treatment survey responses to subjects’ baseline survey responses, we find that those informed of the need to register with a party were more likely to affiliate with a party and subsequently showed stronger partisanship. Further, we find that the treatment group also demonstrated greater concordance than the control group between their pre-treatment latent partisanship and their post-treatment reported voting behavior and intentions and evaluations of partisan figures. Thus our treatment, which caused a strengthening of partisan identity, also caused a shift in subjects’ candidate preferences and evaluations of salient political figures. This finding is consistent with the claim that partisanship is an active force changing how citizens behave in and perceive the political world.
    JEL: D72 H0
    Date: 2009–09
  3. By: Nordin, Mattias (Department of Economics)
    Abstract: This paper investigates how information affect voting behaviour. There exist a large literature suggesting that uninformed voters can use informational shortcuts or cues to vote as if they were informed. This paper tests this hypothesis using unique Swedish individual survey data on the preferences of both politicians and voters. I find that uninformed voters are significantly worse than informed voters at voting for their most preferred politicians. This suggests that uninformed voters can not make up for their lack of information using shortcuts. Furthermore, the errors uninformed voters make do not cancel out in large elections. Estimates suggest that the ruling majorities would have switched in almost 5% of Swedish municipalities had all voters been fully informed. The effects are estimated with both parametric and nonparametric estimation techniques.
    Keywords: Voting behaviour; Citizen candidates; Information; Cues
    JEL: D70 D80 H71
    Date: 2009–09–18
  4. By: Manabu Fujimura
    Abstract: There were many challenges involved in the conduct of the elections. For example, the people had to cast votes among 16 presidential candidates (2 candidates withdrew two days before the elections) in some 25,000 polling stations across a country with geographical difficulty, uncertain security and inexperience with voting. In addition to about 10 million voters that are reportedly subject to multiple registering in some regions and under-registration in others, some 1.5 million refugees in Pakistan and 800,000 in Iran were expected to vote. Many concerns in the economy like re-exports, cultivation of poppy are discussed.
    Keywords: voters, candidates, vote, elections, farmers, production, refugess, pakistan, economy, exports, geographical, afghan economy, afghanistan
    Date: 2009
  5. By: Dhimitri Qirjo (Department of Economics, Florida International University)
    Abstract: This paper develops a political-economic analysis of immigration in a developed country that operates in a direct democracy regime. It shows that, in a monopolistic competitive environment with differentiated capital intensive commodities produced under increasing returns to scale, labor liberalization is more likely to come about in the societies that have more taste for varieties. This is due to the availability of more and cheaper varieties. It also shows that, the workers and capital owners could share the same positive stance toward labor liberalization. It follows that the latter is impossible in a perfect competitive environment. Finally, in a two period dynamic model with forward looking voters, it demonstrates that the median voter is willing to accept fewer immigrants in the first period, in order to preserve her domestic political influence in the second period due to the naturalization of the immigrants accepted in the first period. Using this strategy, the median voter maximizes her gains from immigration by accepting more immigrants in total at the end of the second period. However, the richer the forward looking median voter, the less restricted will be the policy of the host country toward immigration in the first period.
    Keywords: Immigration, Long Run General Equilibrium, Direct Democracy, Perfect Competition, Monopolistic Competition, Factor Price Equalization.
    JEL: D41 D72 F12 F22 J61 O24
    Date: 2009–09
  6. By: Selim Jürgen Ergun (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: I analyze the post-electoral coalition formation process in a two dimensional political environment. The two dimensions are the degree of a proportional tax rate and the degree of a group-speci?c public good. Parties are o¢ ce-motivated and care instrumentally about policy. I analyze when stable coalitions exist and obtain that for that to occur o¢ ce bene?ts should exceed a certain level. I analyze how this critical level and the set of policies implemented are a¤ected by the income levels and the degree of diversity. For both o¢ ce and policy-motivated parties the same result holds but the critical level might be lower.
    Keywords: Electoral competition, coalition formation, public goods, income redistribution.
    JEL: D72 H40 H10
    Date: 2009–09–14
  7. By: Jerome Creel (Observatoire Français des Conjonctures Économiques); Etienne Farvaque (Université de Lille)
    Abstract: The paper first reviews the evolution of federal fiscal rules in the United States, showing a trend towards balanced-budget rules, not golden rules. An explanation to this trend is provided in a model that includes voter's preferences that are skewed by the history of the budget structure, and fiscal rules on the budget. Previous results in the literature are generalized, and the implications of fiscal rules for the use of debt as a strategic asset in the hands of politicians are derived. The inclusion of a golden rule of public finance is compared with that of a balanced-budget rule. Because of the presence of habits, we show that politicians are more prone to adopt balanced-budget rules than a golden rule.
    Keywords: Budget deficit, debt, political economy, fiscal rules, habit effect
    JEL: D72 D78 H62
    Date: 2009
  8. By: BLAIS, Andre; LASLIER, Jean-François; SAUGER, Nicolas; VAN DER STRAETEN, Karine
    Date: 2009–07
  9. By: Eduard J. Bomhoff (Nottingham University Business School - Malaysia Campus)
    Abstract: This paper describes and analyzes outcomes of the first World Values Survey for Malaysia, an upper-middle income country that was not yet included in the four previous Surveys. I look at results for tolerance, interest in democracy and other survey questions, and find that the Malaysian Chinese are more satisfied with their life than the Singapore Chinese. Dissatisfaction with the political culture in Malaysia is strongest for the rural poor, both Chinese and Malay. The paper also discusses some political developments in Malaysia up to the March 2008 election.
    Date: 2009–07
  10. By: Adi Brender; Allan Drazen
    Abstract: Since a key function of competitive elections is to allow voters to express their policy preferences, one might take it for granted that when leadership changes, policy change follows. Using a dataset we created on the composition of central government expenditures in a panel of 71 democracies over 1972-2003, we test whether changes in leadership induce significant changes in spending composition, as well as looking at the effect of other political and economic variables. We find that the replacement of a leader tends to have no significant effect on expenditure composition in the short-run. This remains true after controlling for a host of political and economic variables. However, over the medium-term leadership changes are associated with larger changes in expenditure composition, mostly in developed countries. We also find that in established democracies, election years are associated with larger changes in expenditure composition while new democracies, which were found by Brender and Drazen (2005) to raise their overall level of expenditures in election years, tend not to have such changes.
    JEL: D72 D78
    Date: 2009–09
  11. By: Olfa Alouini (Observatoire Français des Conjonctures Économiques)
    Date: 2009
  12. By: Subhayu Bandyopadhyay; Sajal Lahiri; Howard J. Wall
    Abstract: This paper examines the effect of cross-border lobbying on domestic lobbying and on external tariffs in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two-stage game which endogenizes the tariff formation function in a political economic model of the directly unproductive rent-seeking activities type. We find that cross-border lobbying unambiguously increases both domestic lobbying and the equilibrium common external tariffs in a CU. The same result also holds for FTA provided tariffs for the member governments are strategic complements. We also develop a specific oligopolistic model of FTA and show that tariffs are indeed strategic complements in such a model.
    Keywords: Free trade ; Tariff
    Date: 2009
  13. By: Ivan Pastine (University College Dublin); Tuvana Pastine (National University of Ireland, Maynooth)
    Abstract: With politician preferences over policy outcomes, the effect of a contribution cap with monetary penalties for exceeding the cap is starkly different from the case with an indifferent politician. In contrast to Kaplan and Wettstein (AER, 2006) and Gale and Che (AER, 2006), a cap is never neutral on the expected cost of contributions nor on the policy outcome. Furthermore more restrictive caps can lead to increased aggregate contributions. When the penalty for exceeding the cap is small enough that it is impossible to suppress all contributions, the influence of money on policy is minimized with a binding but non-zero cap and maximized with no cap.
    Keywords: All-pay auction, campaign finance reform, soft money, explicit ceiling, BCRA.
    Date: 2009–09–07
  14. By: Klaus Desmet; Ignacio Ortuño-Ortín; Romain Wacziarg
    Abstract: This paper proposes a new method to measure ethnolinguistic diversity and offers new results linking such diversity with a range of political economy outcomes -- civil conflict, redistribution, economic growth and the provision of public goods. We use linguistic trees, describing the genealogical relationship between the entire set of 6,912 world languages, to compute measures of fractionalization and polarization at different levels of linguistic aggregation. By doing so, we let the data inform us on which linguistic cleavages are most relevant, rather than making ad hoc choices of linguistic classifications. We find drastically different effects of linguistic diversity at different levels of aggregation: deep cleavages, originating thousands of years ago, lead to measures of diversity that are better predictors of civil conflict and redistribution than those that account for more recent and superficial divisions. The opposite pattern holds when it comes to the impact of linguistic diversity on growth and public goods provision, where finer distinctions between languages matter.
    JEL: H1 N4 O4 O5
    Date: 2009–09
  15. 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
  16. By: Shepherd, Ben
    Abstract: This paper shows that longer trade times are associated with higher levels of trade-related corruption, consistent with a theoretical framework in which “fast” producers earn higher profits than “slow” ones, but may have to pay “speed money” to possibly corrupt customs officials. This finding is robust to the use of corruption measures based on perceptions and reported behavior, the inclusion of a wide range of control variables from the previous literature, and estimation by a variety of methods including instrumental variables. Moreover, results from a gravity model show that the combination of slow border procedures and rampant corruption acts as a significant drag on international trade, in line with the model's predictions: the elasticity of bilateral trade with respect to trade time is around 5% stronger in a country with rampant corruption compared with a corruption free country. Together, these results suggest that improved trade facilitation can be an effective and feasible policy for reducing corruption over the short-term in weak institutional environments.
    Keywords: International trade; Trade policy; Economic Development; Political Economy; Corruption.
    JEL: D73 F13 O17
    Date: 2009–09–16
  17. 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 .nd 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 prfitable 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.
    Keywords: Trust, trustworthiness, economic performance, culture, false consensus
    JEL: A1 A12 D1 O15 Z1
    Date: 2009

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