nep-pol New Economics Papers
on Positive Political Economics
Issue of 2009‒11‒14
twenty papers chosen by
Eugene Beaulieu
University of Calgary

  1. Suggesting an alternative electoral proportional system. Blank votes count By Orestis Troumpounis
  2. Constitutional Design and Political Communication By Xefteris, Dimitrios
  3. Inter-Regional redistribution through infrastructure investment: tactical or programmatic? By Albert Solé-Ollé
  4. Limits to citizens’ demand in a democracy By Santanu Gupta; Raghbendra Jha
  5. Immigration, Citizenship, and the Size of Government By Ortega, Francesc
  6. Plurality versus proportional electoral rule: study of voters’ representativeness By Amedeo Piolatto
  7. How Do Female Spouses’ Political Interests Affect Male Spouses’ Views About a Women’s Issue? By Yamamura, Eiji
  8. A "winner" under any voting rule ? An experiment on the single transferable vote By Etienne Farvaque; Hubert Jayet; Lionel Ragot
  9. The Foundations of Limited Authoritarian Government: Institutions and Power-Sharing in Dictatorships By Boix, Carles; Svolik, Milan
  10. 60 Jahre Grundgesetz der Bundesrepublik Deutschland: Einige Bemerkungen zu Demokratie und Föderalismus in Deutschland aus schweizerischer Perspektive By Gebhard Kirchgässner
  11. Electoral Uncertainty, the Deficit Bias and the Electoral Cycle in a New Keynesian Economy By Campbell Leith; Simon Wren-Lewis
  12. Tax Salience, Voting, and Deliberation By Rupert Sausgruber; Jean-Robert Tyran
  13. Sharing the Blame? Local Electoral Accountability and Centralized School Finance in California By Marcelin Joanis
  14. Sharing the blame? Local electoral accountability and centralized school finance in California By Marcelin Joanis
  15. Redistributive Politics and Market Efficiency: An Experimental Study By Großer, Jens; Reuben, Ernesto
  16. A re-evaluation of ideas, interests and politics in repeal: the case of Belgian corn laws, 1834 -1873 By Maarten VAN DIJCK; Tom TRUYTS
  17. Inequality, Mobility and Redistributive Politics By Ryo Arawatari; Tetsuo Ono
  18. Is there a direct effect of corruption on growth? By Dzhumashev, Ratbek
  19. The political economy of efficient public good provision: evidence from Flemish libraries using a generalised conditional efficiency framework By Kristof DE WITTE; Benny GEYS
  20. The role of macroeconomic performance in individual’s attitudes towards protectionism By Natalia Melgar; Juliette Milgram; Máximo Rossi

  1. By: Orestis Troumpounis (Universitat Autonoma de Barcelona)
    Abstract: I consider a two-party parliamentary election where parties compete on a quality (or valence) dimension. First I motivate why in such an election a voter may decide to cast a blank vote. Second I define a new voting system, inspired in the standard proportional representation system, where the percentage of blank votes is translated into vacant seats in the parliament. I analyze party competition assuming adapted versions of the models of “Bertand” and “Cournot”. I compare the equilibrium outcomes on parties’ quality and profits obtained with both the alternative proportional system and the standard one. I show that society and parties may have interests in conflict.
    Keywords: electoral systems, blank voting, proportional representation systems, endogenous valence
    JEL: D72
    Date: 2009
  2. By: Xefteris, Dimitrios
    Abstract: This paper models the constitutional design process, and points out the importance of political communication (defined as the level of information about the social distribution of policy preferences that individuals hold, at the time of this process) on the "extent" of "democratic restraints" of the socially preferred constitution and on the welfare derived by the society from its implementation. The results demonstrate that the level of political communication has a positive effect on the level of democracy of the socially preferred constitution and on social welfare. Moreover, it is proved that, even if there exist no tolerance for dictatorship by societies in general, the level of democracy demanded by the society, reaches the maximum possible level, only if political communication is "perfect". That is, the socially preferred constitution in cases of "imperfect" political communication incorporates both dictatorial and democratic elements.
    Keywords: constitution; political communication; democracy
    JEL: D81 D70 K00 D60
    Date: 2009–06–01
  3. By: Albert Solé-Ollé (Universitat de Barcelona)
    Abstract: In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more ‘Political power’ still receive more investment. These districts are those where the incumbents’ Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of ‘Political power’ and per capita income.
    Keywords: infrastructures, political economy, redistribution
    JEL: R1 O4
    Date: 2009
  4. By: Santanu Gupta; Raghbendra Jha
    Abstract: This paper examines how citizens decide on their reservation utilities (expectations), in a model with democratic institutions and majority rule. If all individuals have identical incomes, then political competition amongst citizens, to attract resources from the government brings reservation utilities of citizens down to zero. The same is not the case when individuals have different incomes, but it is the richest and the median income citizens who win in the process and tax resources are equally distributed between them. In a situation where the government is corrupt and siphons off a part of the tax revenues, citizens can by having higher reservation utilities prevent it, but choose not to do so, given the political competition amongst citizens. Corruption is manifested in higher tax rates and not in a decline in public good allocation to jurisdictions.
    Keywords: median voter, local public good, reservation utility
    JEL: H41 H72
    Date: 2009
  5. By: Ortega, Francesc (Universitat Pompeu Fabra)
    Abstract: This paper analyzes the political sustainability of the welfare state in an environment where immigration is the main demographic force and where governments are able to influence the size and skill composition of immigration flows. Specifically, I present a dynamic political-economy model where both income redistribution and immigration policy are chosen by majority vote. Voters take into account their children's prospects of economic mobility and the future political consequences of today's policies. Over time, the skill distribution evolves due to intergenerational skill upgrading and immigration. I consider three immigration and citizenship regimes. In the first, immigrants stay permanently in the country and citizenship is obtained by birthplace (jus soli). In the second regime immigration is also permanent but citizenship is passed only by bloodline (jus sanguinis). In the third regime immigrants are only admitted temporarily and cannot vote. Our main finding is that under permanent migration and jus soli there exist equilibria where income redistribution is sustained indefinitely, despite constant skill upgrading in the population. However, this is not the case in the other two regimes. The crucial insight is that unskilled voters trade off the lower wages from larger unskilled immigration with the increased political support for redistributive transfers provided by the children of the current immigrants. In contrast, in the regimes where immigrants and their children do not gain the right to vote, unskilled voters oppose any unskilled immigration and political support for income transfers vanishes. We argue that these mechanisms have important implications for the ongoing debates over comprehensive immigration reform in the US and elsewhere.
    Keywords: immigration, citizenship, redistributive policies, political economy
    JEL: F22 I2 J62
    Date: 2009–10
  6. By: Amedeo Piolatto (Universidad de Alicante)
    Abstract: Thinking of electoral rules, common wisdom suggests that proportional rule is more fair, since all voters are equally represented: at times, it turns out that this is false. I study the formation of both Parliament and Government; for the composition of the former I consider plurality and proportional rule; for the formation of the latter, I assume that parties play a non-cooperative game `a la Rubinstein. I show that, unless parties are impatient to form a Government, proportional electoral rules translate into a more distortive distribution of power among parties than plurality rule; this happens because of the bargaining power of small parties during Government formation.
    Keywords: Electoral systems, proportional rule, plurality rule, voters’ representation
    JEL: C71 D72 H1 P16
    Date: 2009
  7. By: Yamamura, Eiji
    Abstract: This paper explored how the degree of female spouses’ political interest affects male spouses’ views about women’s empowerment, using individual level data in Japan. Controlling for unobserved area-specific fixed effects, results showed that males were likely to consider women’s empowerment important if their spouses were interested in politics. This spouse effect was observed for conservative males but not for progressive-neutral males. Results were unchanged when the endogeneity bias caused by spouses’ political interests were controlled for. These findings suggest that female family members’ political interests and views play an important role in determining male views regarding women’s issues.
    Keywords: Spouse; political opinion; women’s empowerment
    JEL: J12 D72 D83 J16
    Date: 2009–10–26
  8. By: Etienne Farvaque (EQUIPPE - Université de Lille I); Hubert Jayet (EQUIPPE - Université de Lille I); Lionel Ragot (EQUIPPE - Université de Lille I, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: In this paper, we expose the results of a voting experiment realised in 2007, during the French Presidential election. This experiment aimed at confronting the Single Transferable vote (SVT) procedure to two criteria : simplicity and the selection of a Condorcet-winner. Building on our electoral sample's preferences, we show that this voting procedure can design a different winner, depending on the vote counting process. With the vote counting process advocated by Hare, the winner is Nicolas Sarkozy, while the Coombs vote counting process has François Bayrou as winner. For these two vote counting processes, the details of the experiment are the same and it is shown that the simplicity criterion is respected. However, with regard to the Condorcet-winner criterion, the Coombs methods is the only one to elect the Condorcet-winner, i.e. François Bayrou.
    Keywords: Field experiments, elections, Single Transferable Vote, voting system, Condorcet Winner.
    Date: 2009–07
  9. By: Boix, Carles (Princeton University); Svolik, Milan (University of Illinois at Urbana-Champaign)
    Abstract: Why do some dictatorships establish institutions that are typically associated with democracy, such as legislatures or political parties? We propose a new theoretical model of institutions and power-sharing in dictatorships. We argue that by facilitating power-sharing, political institutions promote the survival of dictatorships. However, authoritarian power-sharing through institutions is feasible only when it is backed by the crude but credible threat of a rebellion by the dictator's allies. Whereas the allies' political opportunities determine the credibility of the threat of a rebellion, institutions alleviate the commitment and monitoring problems that stem from the secrecy in authoritarian governance. We use both historical and large-N data to assess these new predictions about the relationship between political institutions, dictator tenure, and the concentration of power in dictatorships.
    Date: 2009
  10. By: Gebhard Kirchgässner
    Abstract: In comparing Switzerland and Germany, this paper discusses basic but potentially conflicting constitutional principles and the problems which can arise from such conflicts and which have to be handled by a constitution. We concentrate on three central areas: (i) the tension between democracy and the rule of law, (ii) direct versus (purely) representative democracy, and (iii) competitive versus co-operative federalism, where we also discuss problems of fiscal equalisation systems. Finally, we present some proposals for a reform of the German political system.
    Keywords: Direct Democracy, Human Rights, Rule of Law, Federalism, Fiscal Equalisation
    JEL: H11 H70
    Date: 2009–10
  11. By: Campbell Leith; Simon Wren-Lewis
    Abstract: Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology. A separate literature, on the New Political Economy, has focused on real economies where there is strategic use of policy instruments in a world of political conflict. In this paper we combine these literatures and assume that policy is set in a New Keynesian economy by one of two policy makers facing electoral uncertainty (in terms of infrequent elections and an endogenous voting mechanism). The policy makers generally share the social welfare function, but differ in their preferences over fiscal expenditure (in its size and/or composition). We use this model to examine three issues that arise from either literature. First, we consider the extent to which electoral competition gives rise to a debt or deficit bias, as one party seeks to win elections and tie the hands of a potential successor, when all debt is defined in nominal terms. Second we examine the extent and nature of the electoral cycle introduced by having two parties reflecting different preferences over either the composition or amount of government spending. Third, we examine whether electoral competition has any impact on the conventional business cycle stabilisation policy, compared to the standard analysis that assumes a single benevolent government.
    Keywords: New Keynesian model, Government debt, Monetary policy, Fiscal policy, Electoral uncertainty, Time consistency
    JEL: E62 E63
    Date: 2009
  12. By: Rupert Sausgruber; Jean-Robert Tyran
    Abstract: Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience biases consumers’ voting on tax regimes, and that experience is an effective de-biasing mechanism in the experimental laboratory. Pre-vote deliberation makes initially held opinions more extreme rather than correct and does not eliminate the bias in the typical committee. Yet, if voters can discuss their experience with the tax regimes they are less likely to be biased.
    Keywords: Tax salience, learning, deliberation, voting
    JEL: C92 H22 D72
    Date: 2009–10
  13. By: Marcelin Joanis (Université de Sherbrooke, GREDI and CIRANO)
    Abstract: While electoral accountability should be stronger when responsibilities are clearly assigned to one political office, the involvement of higher tiers of government is often associated with policies specifically designed to improve local accountability. This paper investigates the impact of centralization on local electoral accountability in the context of California's school finance system. Results show that voters are responsive to differences in dropout rates and pupil-teacher ratios, and that incumbents are less likely to be reelected when a districts degree of centralization is high. The No Child Left Behind Act of 2001 appears to have sharpened local electoral accountability.
    Keywords: centralization, accountability, school …nance, local elections, shared responsibility,No Child Left Behind.
    JEL: H75 H77 D72 I2
    Date: 2009–09–01
  14. By: Marcelin Joanis (Université de Sherbrooke)
    Abstract: While electoral accountability should be stronger when responsibilities are clearly assigned to one political office, the involvement of higher tiers of government is often associated with policies specifically designed to improve local accountability. This paper investigates the impact of centralization on local electoral accountability in the context of California’s school finance system. Results show that voters are responsive to differences in dropout rates and pupil-teacher ratios, and that incumbents are less likely to be reelected when a district’s degree of centralization is high. The No Child Left Behind Act of 2001 appears to have sharpened local electoral accountability.
    Keywords: centralization, accountability, school finance, local elections, shared responsibility, No Child Left Behind
    JEL: H75 H77 D72 I2
    Date: 2009
  15. By: Großer, Jens (Florida State University); Reuben, Ernesto (Columbia University)
    Abstract: We study the interaction between competitive markets that produce large but unequally distributed welfare gains and elections through which the poor majority can redistribute income away from the rich minority. In our simple laboratory democracy, subjects first earn their income by trading in a double auction market and thereafter vote on redistributive policies in two-candidate elections. In addition, in one of the treatments subjects can attempt to influence the candidates’ policy choices by transferring money to them. We observe very high levels of redistribution – even when transfers to candidates are possible – with little effect on market efficiency. Overall, the experimental results are explained by our equilibrium predictions.
    Keywords: redistribution, double auction, elections, lobbying
    JEL: H23 D41 D72 D73
    Date: 2009–11
  16. By: Maarten VAN DIJCK; Tom TRUYTS
    Abstract: Economic interests, the influence of economic ideas and politics have been put forward in the literature as explanations for the British Repeal of the Corn Laws in 1846. In this paper, we will evaluate these competing explanations using the case of the liberalization of Belgian corn tariffs. The Belgian protectionist Corn Laws of 1834 were abolished in different steps between 1845 and 1873. The first part of this paper uses quantitative methods to assess the success of party affiliation, personal interests and the economic profile of the constituencies in predicting voting behavior. Thanks to the detailed censuses of 1846 on agriculture, industry and population, it is possible to typify the economic make-up of the electoral districts in much more detail than in the British case. However, the analysis of roll-call voting proves that party affiliation and personal and constituency economic interests are insufficient to explain the shift towards free trade. The second part of the paper then discusses the role played by political strategy and ideas in the liberalization of corn tariffs, using a qualitative analysis of the debates on tariff policy. The large number of votes over a forty year period allows us to document the relationship between ideas and interests in a new way.
    Date: 2009–09
  17. By: Ryo Arawatari (Faculty of Economics, Shinshu University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper develops a model where income inequality and intergenerational mobility are jointly determined via redistributive politics. The model includes two key factors: accessibility of tertiary education for poor-born agents and multiple, selffulfilling expectations of agents. Given these factors, the model provides predictions of cross-country differences in inequality and mobility consistent with empirical observations. The model also demonstrates the dynamic motion of inequality and mobility as influenced by changes in the expectations of agents.
    Keywords: Inequality; Intergenerational mobility; Redistribution; Markov perfect political equilibrium; Overlapping generations
    JEL: D70 H55 I38
    Date: 2009–04
  18. By: Dzhumashev, Ratbek
    Abstract: Recent empirical studies find that the direct effect of corruption on growth is statistically insignificant. However, there exists a discrepancy between these results and the intuition that corruption reduces over-all productivity, because total factor productivity also depends on the quality of institutions and their efficiency. The current paper addresses this issue and offers a new perspective on growth effects of corruption and shows that direct and indirect growth effects of corruption can be statistically significant. Moreover, the empirical results confirm the existence of both negative and positive growth effect of corruption.
    Keywords: corruption; growth
    JEL: O11 D73 O41 O43
    Date: 2009–11–09
  19. By: Kristof DE WITTE; Benny GEYS
    Abstract: Provision of most public goods (e.g., health care, library services, education, utilities) can be characterised by a two-stage ‘production’ process. The first stage translates basic inputs (e.g., labour and capital) into service potential (e.g., opening hours), while the second stage describes how these programmatic inputs are transformed into observed outputs (e.g., school outcomes, library circulation). While the latter stage is best analysed in a supply-demand framework, particularly in the former stage one would like to have efficient public production. Hence, unlike previous work on public sector efficiency (which often conflates both ‘production’ stages), this paper analyses how political economy factors shape efficient public good provision in stage one (using local public libraries as our centre of attention). To do so, we use a specially tailored, fully non-parametric efficiency model. The model is rooted in popular Data Envelopment Analysis models, but allows for both outlying observations and heterogeneity (i.e., a conditional efficiency model). Using an exceptionally rich dataset comprising all 290 Flemish public libraries, our findings suggest that the ideological stance of the local government, the wealth and density of the local population and the source of library funding (i.e., local funding versus intergovernmental transfers) are crucial determinants of library efficiency.
    Keywords: Nonparametric estimation, Conditional efficiency, Political economy, Public good provision, Libraries.
    JEL: C14 C61 I21
    Date: 2009–06
  20. By: Natalia Melgar (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Juliette Milgram (Departamento de Teoría e Historia Económica - Universidad de Granada); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: In this paper we investigate some factors shaping individual support for protectionism that have not been studied previously. We examine a heterogeneous sample of thirty countries which includes both small and large and developed and developing countries using data from the 2003 International Social Survey Program (ISSP). We confirm the influence of social status (education, age and relative income), values and attachments on preferences for trade policies and the fact that skilled people are also more likely to be pro-trade. We also verify previous findings concerning the fact that individual’s opinions match with how their revenue could be affected in the medium or long term by trade liberalization. We highlight other important factors influencing public opinion towards protectionism: individual support for protectionism is also affected by the macroeconomic context and size of their country of residence.
    Keywords: Preferences, protectionism support, free trade, mercantilist, nationalism
    JEL: D01 F13
    Date: 2009–07

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